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Granules India Ltd.
4
Recommendation
BUY
CMP (28/1/2015)
Rs. 849
Target Price
Rs. 1128
Sector
Pharmaceuticals
Stock Details
BSE Code
532482
NSE Code
GRANULES
Initiating Coverage
Bloomberg Code
GRAN IN
Market Cap (Rs cr)
1702
Free Float (%)
51.41
52- wk HI/Lo (Rs)
940/208
Avg. volume NSE (Quarterly)
14,722
Face Value (Rs)
In-line Results
Granules India Ltd (GIL) posted results in-line with our expectations. For the
quarter sales grew by 12.5% to Rs 319.7 cr (in-line with management’s
commentary, affected because of HudHud cyclone in Oct’14 which impacted
the Auctus sales). EBITDA margins were also in line with our expectations of
17% v/s 15.9% yoy/17% qoq. For the full year the management has maintained
its guidance of standalone sales growth of 15% with steady margins.
Key Highlights


10
Dividend (FY 14)
35%
Shares o/s (Cr)
2.0
Relative Performance
1Mth
3Mth
1Yr
GIL
Sensex
7.1%
5.4%
272.6%
8.5%
10.0%
42.9%




Shareholding Pattern
Promoters Holding
st
31 Dec 14
48.59
Institutional (Incl. FII)
5.21
Corporate Bodies
4.10
Public & others
42.10
Runjhun Jain
022 – 39268177
Sr. Research Analyst
[email protected]
The company reported favorable sales composition with Formulations (FD)
contributing 42% (v/s 39% in Q3FY14), PFI 25% (33%) and API 33% (28%).
This is in-line of management’s guidance of achieving 50% sales from FD.
Auctus sales for the quarter are Rs 20.7 cr (vs Q2FY15 sales of Rs 25.1 cr Q1
Rs 26.1 cr). Sales was lower due to plant shutdown because of HudHud
cyclone and also was indicated by the management earlier. It reported
EBITDA loss of Rs 1.2 cr. Management has guided for profit for Auctus in Q4
and with minor loss (EBITDA level) for full year, if not breakeven levels. For
the full year Auctus is expected to report Rs 110 cr sales.
GIL has launched an Abacavir product in Q2FY15 (developed from the
Aucuts pipeline). It is expected to report Rs 10 cr sales and around Rs 20-25
cr in FY16. The company is also in the process of developing 4-5 new API
products and likely to launched them in Q1FY16.
As indicated earlier, construction work of Omnichem JV is completed and
company has started the trial batched. For FY16, the JV is expected to
report sales of Rs 75-100 cr. We have factored in Rs 50 cr sales.
Tax for the quarter is lower due to adjustment of accumulated losses of
Auctus (which is around Rs 13 cr)
The company has announced Rs 250 cr QIP (with Greenshoe option) to
fund its future capex. It has also announced stock split from Rs 10 FV to Rs
1 FV.
Valuation & Recommendation
In the past five years from FY09-14, the company’s sales have grown at a CAGR
of 23.2% with 67.8% PAT growth. For the next three years we expect the
company’s sales to grow by 28% and PAT by 44%. We expect the company’s
EBITDA margins to improve 14.4% (consol in FY14) to 18% in FY17E, due to
operational efficiency, turnaround of Auctus Pharma and change in business
mix (higher contribution from formulations and Omnichem’s CRAMS).
The stock is trading at attractive valuations 16.6x/12.1x/9.4x of our
FY15E/FY16E/F17E expected earnings We recommend BUY for price target of
1,128 (13x on FY17E EPS), an upside of 33% from current levels.
Year
Consolidated
Sales
(Rs cr)
Growth
(%)
EBITDA
(Rs cr)
Margin
(%)
PAT
(Rs cr)
Margin
(%)
EPS (Rs)
P/E
(x)
RoE (%)
FY14A
FY15E
FY16E
FY17E
1095.9
1335.4
1617.0
1930.0
43.4%
21.9%
21.1%
19.4%
158.3
229.7
291.1
353.2
14.4%
17.2%
18.0%
18.3%
75.2
102.8
141.2
181.1
6.9%
7.7%
8.7%
9.4%
37.5
51.2
70.4
90.3
22.6
16.6
12.1
9.4
21.1%
22.9%
24.3%
24.1%
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Granules India Ltd.
Initiating Coverage
Quarterly Result
Consolidated (Rs cr)
Net sales
Cost of Materials
Staff cost
R&D Exps
Other Exps
Total Expenses
EBITDA
margins
Depreciation
EBIT
Interest
Other income
PBT
Tax
Tax rate
EO
PAT
Equity Capital
FV
EPS
Q3FY15
319.7
176.0
29.4
0.6
59.1
265.2
54.4
17.0%
13.6
40.9
8.9
0.9
32.8
9.2
28.2%
0.0
23.6
20.1
10.0
11.7
Q2FY15
307.6
169.9
25.9
0.7
58.8
255.3
52.3
17.0%
13.1
39.3
8.0
0.5
31.8
9.7
30.5%
0.0
22.1
20.1
10.0
11.0
qoq
3.9
3.6
13.7
-8.7
0.5
3.9
4.0
3.9
4.0
11.2
61.2
3.2
-4.8
6.7
6.7
Q3FY14
284.1
159.8
22.4
1.2
55.6
239.0
45.1
15.9%
7.4
37.7
4.6
0.5
33.6
11.8
35.1%
0.0
21.8
20.1
10.0
10.8
yoy
12.5
10.2
31.2
-47.4
6.3
11.0
20.8
83.2
8.5
96.0
82.2
-2.3
-21.5
8.1
8.1
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Granules India Ltd.
Financials (consolidated)
Consol P&L (Rs. Cr) FY14A
FY16E
FY17E
Balance Sheet (Rs Cr)
Share Capital
FY14A
FY15E
FY16E
FY17E
Net Sales
1095.9
1335.4
1617.0
1930.0
20.3
20.5
20.5
20.5
% change
43.4%
21.9%
21.1%
19.4%
Reserves & Surplus
335.4
428.5
560.3
730.8
356.0
449.1
580.8
751.3
30.3
30.3
30.3
30.3
Total Loans
441.7
481.7
451.7
421.7
Trade Payables
135.5
169.2
201.2
240.2
Provi s i ons
12.3
15.2
16.6
17.5
Other CL
16.2
17.7
20.9
24.8
Total Liabilities
992.0
1163.1
1301.5
1485.8
Net Fixed Assets
482.5
612.1
656.0
670.5
EBITDA
158.3
229.7
291.1
353.2
Net Worth
EBITDA margin
14.4%
17.2%
18.0%
18.3%
Net Deferred Tax Liab
Depn & Amort
29.8
50.0
56.0
60.5
128.5
179.7
235.0
292.7
20.4
31.3
29.4
27.4
4.3
5.0
5.0
5.0
PBT
112.4
153.4
210.7
270.3
Tax
37.1
50.6
69.5
89.2
Operating income
Interest
Other Income
Initiating Coverage
FY15E
MI & EO
0.0
0.0
0.0
0.0
Capital WIP
124.6
24.9
0.0
0.0
PAT
75.2
102.8
141.2
181.1
Investments
0.2
5.0
5.0
5.0
PAT margin (%)
6.9%
7.7%
8.7%
9.4%
Cash & Bank
2.0
2.0
2.0
2.0
Adj EPS
37.5
51.2
70.4
90.3
Cash EPS
52.4
76.1
98.3
120.4
Dec.13
Mar.14
June.14
Sept.14
284.1
317.5
311.0
307.6
45.1
50.1
52.8
52.3
Cash Flow (Rs. Cr)
7.4
10.6
11.7
13.1
Op CF before tax
37.7
39.5
41.1
39.3
4.6
7.8
7.4
8.0
CF from Operation
Sh o/s - Diluted
Qtrly-Consol
Revenue
EBITDA
Dep & Amorz
Op Income
Interest
Other Inc.
41.7
114.8
161.6
246.8
Inventories
174.2
198.1
235.7
281.3
Debtors
110.9
146.3
177.2
211.5
58.0
61.8
66.0
70.7
0.0
0.0
0.0
0.0
992.0
1163.1
1301.5
1485.8
FY14A
FY15E
FY16E
FY17E
158.3
229.7
291.1
353.2
Change in WC
-32.8
-25.2
-36.0
-40.8
Tax
-37.1
-50.6
-69.5
-89.2
88.3
153.9
185.5
223.2
-282.2
-80.0
-75.0
-75.0
Loans & Advances
Misc Exp
Total Assets
0.5
1.5
0.4
0.5
PBT
33.6
33.2
34.1
31.8
Tax
11.8
9.6
11.3
9.7
Oth Inc & Investments
0.0
0.0
0.0
0.0
CF from Investing
PAT
21.8
23.6
22.9
22.1
Financing
EPS (Rs.)
10.8
11.7
11.4
11.0
Diviend Paid
Performance Ratio FY14A
FY15E
FY16E
FY17E
Share Capital
0.1
0.0
0.0
0.0
EBITDA margin (%)
14.4%
17.2%
18.0%
18.3%
Loans
171.3
40.0
-30.0
-30.0
EBIT margin (%)
11.7%
13.5%
14.5%
15.2%
Interest
-20.4
-31.3
-29.4
-27.4
PAT margin (%)
6.9%
7.7%
8.7%
9.4%
Others
47.0
-0.3
0.0
0.0
ROE (%)
21.1%
22.9%
24.3%
24.1%
CF from Financing
189.7
-1.0
-68.8
-68.0
ROCE (%)
15.5%
18.7%
22.1%
24.3%
Net Chg. in Cash
0.0
73.1
46.8
85.2
PAT growth (%)
131.0%
36.6%
37.4%
28.3%
Cash at beginning
41.7
41.7
114.8
161.6
Debt/Equity (x)
1.2
1.1
0.8
0.6
Cash at end
41.7
114.8
161.6
246.8
Valuation Ratio
FY14A
FY15E
FY16E
FY17E
FY14A
FY15E
FY16E
FY17E
22.6
16.6
12.1
9.4
Adj EPS
2.4
1.9
1.5
1.1
BV per share
1.9
1.5
1.2
1.0
Cash per share
13.3
9.0
6.8
5.3
Dividend per share
EO
Price Earnings (x)
Price/BV (x)
EV / Sales
EV / EBITDA
Capex
Per Share Data
4.3
0.2
5.0
5.0
-277.9
-79.8
-70.0
-70.0
-8.3
-9.4
-9.4
-10.6
37.5
51.2
70.4
90.3
177.4
223.8
289.5
374.5
20.8
57.2
80.6
123.0
3.5
4.0
4.0
4.5
3|Page
Initiating Coverage
Granules India Ltd.
Disclaimer:
This Document has been prepared by Nirmal Bang Research (A Division of Nirmal Bang Securities PVT LTD). The information, analysis and
estimates contained herein are based on Nirmal Bang Research assessment and have been obtained from sources believed to be reliable. This
document is meant for the use of the intended recipient only. This document, at best, represents Nirmal Bang Research opinion and is meant for
general information only. Nirmal Bang Research, its directors, officers or employees shall not in anyway be responsible for the contents stated
herein. Nirmal Bang Research expressly disclaims any and all liabilities that may arise from information, errors or omissions in this connection. This
document is not to be considered as an offer to sell or a solicitation to buy any securities. Nirmal Bang Research, its affiliates and their employees
may from time to time hold positions in securities referred to herein. Nirmal Bang Research or its affiliates may from time to time solicit from or
perform investment banking or other services for any company mentioned in this document.
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