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Buy Granules India; target of Rs 170: HDFC Securities

November 24
03:42 2017

HDFC Securities’s research report on Granules India

Granules India (GRAN) reported another quarter of top-line growth (8% YoY), after  a subdued FY17. Revenue was Rs 3.9bn, in-line with estimates. EBITDA was  Rs  769mn  (up  ~4%  YoY),  implying  a margin of 19.6%, ~190bps below estimates.  An  increase in employee costs (+8% QoQ) owing to hiring at the US subsidiary, led to the subdued margin performance. A higher tax rate and increasing  finance  costs  (additional debt taken on during 2QFY18) led to PAT declining 1% YoY to Rs 403mn.

Outlook
We  believe  that  2HFY18  will see the start of strong top-line growth for GRAN,  on  the  back  of expected ANDA approvals for the US market and core business  capacity  expansion  kicking  in.  With  the full impact of these factors  likely  to  take  some  time to be visible, we expect FY19 to be a strong  growth year. Overall, we expect ~17% revenue CAGR, ~21% EBITDA CAGR and  ~24%  PAT CAGR over FY17-20E. Maintain BUY with a revised TP of Rs 170 (16x Sep-19E EPS).

For all recommendations report, click here

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