Granules India Stock: Analyst Deven Choksey Sets ₹588 Target, Revises Rating to ACCUMULATE After Strong Q2FY26 Results

Granules India showcased a strong operational performance in the second quarter of the financial year 2026 (Q2FY26). The company registered Revenue from Operations amounting to INR 12,970 Million, marking a significant 34% year-over-year (YoY) growth and exceeding analyst estimates by 8.8%. This impressive revenue surge was primarily fueled by robust formulation sales in North America and Europe, complemented by improved momentum in Active Pharmaceutical Ingredient (API) and Pharmaceutical Formulation Intermediates (PFI) segments in Rest of World (ROW) markets.

The revenue contribution breakdown reveals that Finished Dosages accounted for a substantial 74% of the total revenue. API contributed 13%, PFI 10%, and the newer Peptides/CDMO segment made up 2%.

Operationally, Granules India demonstrated efficiency gains. The Gross margin expanded by 82 basis points quarter-over-quarter, supported by better operational efficiencies and a favourable product mix. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) showed a meaningful improvement, reaching INR 2,782 Million. This growth occurred despite absorbing an EBITDA loss of INR 200 Million from the Ascelis Peptides business, highlighting the underlying strength in core operations.

Cash flow and investment metrics indicate continued strategic deployment. Operating cash flow stood at INR 1,937 Million, while Capital Expenditure (CAPEX) during the quarter was INR 2,112 Million. The company maintained its focus on innovation and long-term capability building with Research and Development (R&D) investments totalling INR 705 Million, which represented 5.4% of sales.

Outlook and Rating Revision:

Analyst Deven Choksey has rolled forward the valuation to September 2027 estimates. Applying a target multiple of 18.0x September 2027 Earnings Per Share (EPS), the analyst arrived at a target price of INR 588 for Granules India.

Given the recent upward movement in the stock's price, the rating has been revised from a "BUY" recommendation to "ACCUMULATE".

Impact:

This news is likely to have a moderate impact on Granules India's stock price and the pharmaceutical sector. An analyst revising their target price and rating can influence investor sentiment and trading decisions for the specific stock.

Rating: 7/10

Difficult Terms:

• Revenue from Operations: The total income generated by a company from its primary business activities (selling goods or services) over a specific period, before deducting any expenses or taxes.
• YoY (Year-over-Year): A comparison of a company's performance metrics (like revenue, profit, etc.) from one period (e.g., a quarter or a year) to the same period in the previous year.
• API (Active Pharmaceutical Ingredient): The biologically active component in a drug that produces the intended therapeutic effect.
• PFI (Pharmaceutical Formulation Intermediates): Intermediate products used in the manufacturing of final drug formulations.
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance before accounting for interest expenses, taxes, depreciation, and amortization. It's used to show profitability from core business operations.
• CAPEX (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment.
• R&D (Research and Development): Activities undertaken by companies to innovate and introduce new products and services, and to improve existing ones.