Buy Granules India; target of Rs 950: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Granules India's 2QFY27 results showed an 8th consecutive quarter of qoq sales growth, driven by API and PFI segments, with a topline beat offset by lower EBITDA margin.
  • The company's gross margin decline was sharper than expected due to higher input costs and mix impact, while opex normalization is expected to be at least a quarter away.
  • Continued traction in controlled substances in the US and strong growth momentum in Europe are key positives, with full-year guidance for Senn (peptide CDMO) maintained.
  • The Gagillapur USFDA inspection outcome is a binary event, and a status quo with respect to the warning letter will be broadly earnings neutral.
  • Near-term US launches, including ex-controlled substances, seem to have been derisked, and a net cash balance sheet could keep inorganic opportunities in play.

Thesis Validation Checklist

  • Investors should watch for the Gagillapur USFDA inspection outcome and its impact on earnings.
  • Capacity utilization at Gagillapur and Genome Valley should be monitored, as well as the progress of near-term US launches.
  • The company's ability to maintain its growth momentum in Europe and controlled substances in the US will be crucial to the investment thesis.
  • Any updates on the warning letter and the company's plans to address the observations cited will be important to track.