Granules India Ltd

Stock Opportunities Untested - but worth a good look
1146

Granules India Q2 concall highlights -

  1. Highest and best numbers in the company’s history. A validation for company’s differentiated business model ( greater backward integration and manufacturing excellence ).
  2. Today Granules is a 22 product company, up from 5 products a few years ago. Company believes in having fewer number of products but achieve excellecnce and cost competitiveness in them, through backward integration into APIs. ( this is what I like the most about the company ).
  3. Company guiding for PAT growth for FY 21 at 80 pc . Next yr onwards, they are guiding for a PAT growth of 25-30 pc with FY 21 as base year.
  4. MUPS technology ( used for extended release tablets ) based ANDA with in house APIs - next growth driver, approvals and launches expected in Q3 and Q4.
  5. Q2 sales - 858 cr vs 700 cr YoY, Gross Margins at 58 pc vs 49 pc YoY due greater share of FDFs, EBITDA margins at 30 pc vs 20 pc, PAT at 164 cr vs 96 cr YoY. Company confident of maintaining atleast 27 pc EBITDA margins going fwd with an aim to keep clocking 30 pc.

Covid related expenses - 9.9 cr in Q2. Total in FY 21 - 19.3 cr.

  1. Company is encouraging a few speciality chemical manufacturers to manufacure some key KSMs like - Para Amino Phenol ( for PCM ) and others with assured contracts ( to reduce China dependence ). Since, these are Spl Chems and not APIs ( plus capital intensive ), company does not intend to make them in house.
  2. Contribution from core molecules at 70 pc, to go down to 50 pc over medium term. Core molecules - Ibuprofen , Metformin, Paracetamol, Methocarbomol, Guaifenesin. New molecules where the company is ramping up include - Losartan, Cetrizine, Fexofenadine. CAPEX for this yr likely around 400 cr. ( around 80 cr for APIs , rest for MUPS block and FDFs ). Better estimate for further CAPEX by next yr. CAPEX not going to stop. However the company is concious of its ROCE profile and would maintain it above a particular threshold desipte the Capex.
  3. Current revenues from Europe ( FY 20 ) at 500 cr. Expected to go upto 1400-1500 cr by FY 23. Europe expected to be a major growth driver going fwd. Company agressively working towards reducing dependence on US and increasing the contibution form ROW, LATAM and Europe. US revenue share likely to be around 40-45 pc by FY 23 ( present share at 53 pc ).

Disc : invested.

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