Motilal Oswal has started coverage on pharmaceutical firm Granules India, setting a target price of Rs 1,010. The company reported steady growth in its core formulation and API businesses during the first quarter of FY27. Investors are now tracking the progress of its early-stage CDMO segment, which currently accounts for a small portion of revenue and is undergoing a ramp-up phase.
Detailed Coverage
Motilal Oswal has introduced its coverage on pharmaceutical company Granules India with a Buy recommendation and a price target of Rs 1,010. The report comes after the company posted its financial results for the first quarter of the 2027 fiscal year, where its revenue, operating profit, and net profit aligned with market expectations.
Core Business Performance
Granules India’s financial stability in the recent quarter was driven by its established divisions, specifically its Formulation (FDF) and Active Pharmaceutical Ingredient (API) segments. This marks five successive quarters of year-over-year earnings growth for the company. These segments remain the primary contributors to its revenue, benefiting from consistent demand for its pharmaceutical products.
CDMO Segment Expansion
A key area for investors to monitor is the company’s entry into the Contract Development and Manufacturing Organization (CDMO) space. This business is currently in the initial development and ramp-up phase. During the first quarter of FY27, this segment contributed Rs 600 million to the company’s total revenue. However, it also reported a minor operating loss of Rs 24 million. This loss is attributed to adjustments linked to project milestone services, which is common for new business divisions in their early scaling period.
Financial Context and Valuation
Motilal Oswal’s valuation for the stock is based on 23 times the company’s projected 12-month earnings. While the core API and formulation segments show steady operational performance, the long-term outlook for the company’s earnings will likely depend on how effectively it can transition the CDMO business from its current development phase into a profitable contributor. Investors may watch for future updates on order execution, project milestones, and the overall margin trajectory as the company continues its spending on this new business area.
Granules India operates in a sector where maintaining high utilization of manufacturing facilities and managing raw material costs are important for sustaining profit margins. As the company expands into the CDMO space, the focus for market participants will remain on the speed of ramp-up, the stability of its core business segments, and whether the company can maintain its growth consistency in the coming quarters.