Here is an excerpt of Review of Granules India by Motilal Oswal Research
From being one of the largest Paracetamol API manufacturers for regulated markets, Granules India (GRAN) has now ventured into CRAMS and US Rx business, where it can leverage its competitive advantage of being a high-quality, low-cost producer. Despite delivering ~40% PAT CAGR over last five years, we expect GRAN to deliver ~35% PAT CAGR till FY20E. This will be led by 1) capacity expansion in the base business, 2) doubling of revenues (INR2.3b in FY20E from INR1.0b in FY17) and expansion in EBITDA margin (>30% in FY20E from ~21% in FY17) in Omnichem CRAMS JV, and 3) new US generic business sales of ~USD85m in FY20 v/s nil currently. GRAN trades at ~11x FY19E EPS. We believe the stock has the potential to deliver >35% return over next 12-18 months, led by multiple re-rating and a strong EPS CAGR of ~35% till FY20.
Key risks to estimates: (1) Higher competition in products like Metformin and Paracetamol. (2) Delay in ramp-up of the US business. (3) Regulatory risk for its manufacturing facility.
