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After 1,800% jump in 10 years, this pharma stock is in no mood to halt

The company is one of the active ingredients and drug formulations makers.

, ETMarkets.com|
Last Updated: Feb 27, 2020, 12.27 PM IST
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In a note on January 21, Anand Rathi Share & Stock Brokers maintained a ‘buy’ rating on the stock and raised the target price to Rs 181 from Rs 172 earlier.
Mumbai: Shares of this smallcap drug formulations maker have rallied nearly 90 per cent in last one year, taking its gains for the past decade to 1,845 per cent.

And analysts say there is no stopping the rally yet.

The company is Granules India, one of the active ingredients and drug formulations makers, which has been on an uptrend due to favourable product mix and a healthy show in the US market.

Share prices of domestic active pharmaceutical ingredients (API) players have seen a strong runup in recent weeks amid expectations of higher demand due to the coronavirus-triggered lockdown in China.

Granules has risen 42.77 per cent for year to date, and added 88.57 per cent for last one year to trade at Rs 173 on Thursday.

The stock is held widely by retail investors with about 27.21 per cent stake, data from MarketsMojo.com showed. State-run life insurer Life Insurance Corporation of India holds nearly 3 per cent.

Of the nine analysts rating the company, six have ‘strong buy’, two have ‘buy’ and one has ‘sell’ ratings on the stock, data from Reuters Eikon showed.

For the quarter ended December, Granules India reported a 6.16 per cent year-on-year growth in net profit at Rs 64.03 crore, impacted by an impairment loss of Rs 32 crore in Granules-Biocause Pharmaceutical, which the company is about to sell off.

In a report on February 24, Emkay Global maintained a ‘buy’ rating on the stock, and raised its target price to Rs 228.

Granules India gets some of its key starting materials (KSMs) from China, but so far it has not witnessed any major disruption, Emkay Global said in a note after hosting a roadshow with the company’s managing director and promoter Krishna Prasad Chigurupati

“Key products such as paracetamol and Ibuprofen are dependent on China, but so far supplies have been broadly smooth for paracetamol intermediates, though with a slight delay. On the other hand, Ibuprofen can see some impact (if the issue prolongs beyond March) as one of the suppliers and its former JV partner, Biocause, is based out of Wuhan and production has been completely halted there. Granules has alternate supply arrangements with IOL Chemicals and remains confident on bridging the gap,” Emkay said in a note.

In a note on January 21, Anand Rathi Share & Stock Brokers maintained a ‘buy’ rating on the stock and raised the target price to Rs 181 from Rs 172 earlier.

The brokerage said Granules continues to raise corporate governance standards and the promoter is committed to fully revoking pledged shares by the end of FY20 with debt-to-Ebitda at 1 times.

“We expect it to maintain strong traction for the next couple of years, driven by formulations and huge contribution from new capacities,” Anand Rathi analysts said in the note.

On January 22, KR Choksey Shares & Securities assigned a ‘buy’ rating to the stock with a price target of Rs 180.

“We expect Granules India to post revenue growth of 18.1 per cent for FY20E and 27.1 per cent in FY21E on the back of new launches in the US as the company focuses on higher value and higher margin business segment of finished dosage form, gain in market share in existing products & commercialisation of high value API plant (Unit IV),” KR Choksey analyst said in the note.
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