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Granules India reported better-than-expected operational performance for the quarter, surpassing revenue and EBITDA estimates. While earnings met expectations due to higher depreciation and tax, growth was driven by improvements in Finished Dosage, Intermediates, and API segments, along with CDMO revenue additions. Motilal Oswal has slightly adjusted FY26 estimates downwards due to a delayed USFDA inspection but maintained FY27/28 projections, setting a price target of INR 650.
Motilal Oswal's latest research report provides an in-depth analysis of Granules India's recent performance and future outlook. The company demonstrated better-than-expected operational performance in the last quarter, achieving a 9.5% beat on revenue and an 8.3% beat on EBITDA. Earnings, however, were in line with estimates primarily due to increased depreciation expenses and a higher tax rate during the period. Granules India saw significant improvements across its key business segments, including Finished Dosage (FD), Pharmaceutical Fine Chemicals (PFI - Intermediates), and Active Pharmaceutical Ingredient (API). The addition of Contract Development and Manufacturing Organization (CDMO) revenue further contributed to the year-on-year growth.
Outlook
Motilal Oswal has slightly revised its financial year 2026 (FY26) estimates downwards by 3%, attributing this to a delay in the United States Food and Drug Administration (USFDA) inspection at the company's Gagillapur site. Despite this, the brokerage has largely maintained its estimates for FY27 and FY28. The firm values Granules India at 19 times its 12-month forward earnings, arriving at a price target (TP) of INR 650.
Impact
This report offers investors a detailed view of Granules India's operational strengths and potential challenges. The price target of INR 650 suggests a potential upside from current market levels, making it a key reference for investors. The slight adjustment due to the USFDA inspection highlights a critical regulatory factor to monitor.
Rating: 7/10
Definitions:
Operational Performance: This refers to how efficiently and effectively a company is conducting its day-to-day business operations to generate revenue and profit.
Revenue: The total amount of income generated by Granules India from its primary business activities, such as selling pharmaceutical products and services, before any expenses are deducted.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's overall financial performance and profitability. It is calculated by taking net income and adding back interest expenses, taxes, and depreciation and amortization charges. It indicates how well the company's core operations are performing.
Finished Dosage (FD): These are the final pharmaceutical products (like tablets, capsules, injections) that are ready to be administered to patients.
Intermediates (PFI - Pharmaceutical Fine Chemicals): These are chemical compounds that are produced during the synthesis of an Active Pharmaceutical Ingredient (API). They are essentially building blocks for the final drug substance.
API (Active Pharmaceutical Ingredient): The core component of a drug that produces the intended therapeutic effect. For example, the active ingredient in a painkiller that reduces pain.
CDMO (Contract Development and Manufacturing Organization): A company that offers services to other pharmaceutical companies, assisting them in developing and manufacturing drugs on a contractual basis.
FY26 Estimates: These are financial projections made by analysts for Granules India's financial performance for the fiscal year ending in March 2026.
USFDA Inspection: An audit or examination conducted by the United States Food and Drug Administration to ensure that drug manufacturers comply with the quality, safety, and efficacy standards required for products sold in the US market.
Gagillapur Site: A specific manufacturing facility owned and operated by Granules India, located in Gagillapur.
12M Forward Earnings: The projected earnings per share (EPS) that the company is expected to generate over the next twelve months.
Price Target (TP): A forecast by financial analysts of the future price of a security, such as a stock, over a specified period. It helps investors gauge potential returns.
