4 Recommendation HOLD Reiterating positive outlook CMP (27/7/2015) Rs. 115 Target Price Rs. 125 Sector Stock Details Pharmaceuticals BSE Code 532482 NSE Code Bloomberg Code GRANULES GRAN IN Market Cap 2,093 Free Float 51.5% 52- wk HI/Lo (Rs) 105/58 Avg. volume NSE (Quarterly) 19,49,200 Face Value Re. 1 Dividend (FY 15) 50% Shares o/s (Cr) 2.0 Relative Performance 1Mth 3Mth 1Yr GIL 23.7% 11.2% 61.8% Sensex 2.0% 2.3% 8.5% Shareholding Pattern 30 th June 15 Promoters Holding 48.5% Institutional (Incl. FII) 3.1% Corporate Bodies 4.8% Public & others 43.6% Runjhun Jain 022 39268177 Sr. Research Analyst runjhun.jain@nirmbang.com Granules India Ltd (GIL) posted good results at profitability levels. Sales came at Rs 345.9 cr, marginally lower than the street expectations of Rs 364.1 cr. While EBITDA maintained the positive trajectory and was Rs 61.8 cr vs Rs 49.0 cr in Q4FY15/Rs 52.8cr in Q1FY15. Margins improved (partially due to lower sales) to 17.9% vs 13.8% in Q4FY15/17.0% in Q1FY16. Standalone performance remained strong during the quarter with sales registering growth of 28.4% at Rs 325.3 cr and EBITDA of Rs 64.2 cr (up 31% yoy) with EBITDA margins of 19.7% (one of the highest in the history of the company) Key Highlights Auctus sales for the quarter were Rs 37 cr (vs Q4 Rs 43.6 cr/q1 Rs 26.1 cr). Auctus sales were marginally impacted as the company used the facility validating new products and due to planned shutdown at GIL s intermediate facility at Bonthapally, which supplies raw material to Auctus Pharma. Despite, this small itch management has maintained its full year sales guidance of Rs 150 cr, which we believe is achievable. Abacavir has done sales of RS 4.7 cr, lower than Q4 sales of Rs 8 cr. The management has launched two new products during the quarter and likely to launch two more during the year. GIL has completed 4000 MT PFI facility, which would be commissioned in Q2 and would drive the PFI revenues. The company has also unveiled an aggressive capex plan for the coming years. It is adding 7000 MT Metformin API facility (Metformin growing in double digits; current capacity 2000 MT) by FY17 (1 st Phase of 3600 MT by Aug 16 with capex of Rs 40-50 cr). The total capex for FY16 is expected to be Rs 150 cr and for FY17 approx. Rs 250 cr. Omnichem JV commercialization is expected to be start from Aug 15. The company has maintained its JV level sales of Rs 100 cr and expects it to be cash break even by Mar 16. The company had taken enabling resolution for QIP however; it has now stopped the plan and instead issuing Rs 200 cr worth of warrants to promoter group, to fund the capex. It shows the inherent confidence the promoters have on the strength and future prospects of the company. Valuation & Recommendation For the next two years we expect the company s sales to grow by 20% and PAT by 38%, due to higher profitability in Auctus Pharma and change in business mix (higher contribution from formulations and Omnichem s CRAMS). The stock has re-rated in the recent times however we believe there is still further upside left and recommend HOLD for price target of 125 (15x on FY17E EPS). Year Consolidated Sales Growth EBITDA Margin PAT Margin EPS (Rs) P/E (x) RoE FY14A 1095.9 43.4% 158.3 14.4% 75.2 6.9% 3.4 34.0 21.1% FY15A 1292.9 18.0% 208.6 16.1% 90.9 7.0% 4.1 28.2 21.2% FY16E 1571.3 21.5% 279.7 17.8% 133.4 8.5% 6.0 19.2 19.8% FY17E 1891.4 20.4% 366.9 19.4% 186.3 9.9% 8.3 13.7 20.4% 1
Quarterly Result Consolidated Q1FY16 Q4FY15 qoq Q1FY15 yoy Net sales 345.9 354.6-2.4 311.0 11.2 Cost of Materials 186.5 220.1-15.3 180.7 3.2 Staff cost 30.7 25.7 19.5 26.0 18.4 R&D Exps 4.6 7.5-39.0 0.8 508.1 Other Exps 62.3 52.2 19.3 50.8 22.7 Total Expenses 284.1 305.6-7.0 258.2 10.0 EBITDA 61.8 49.0 26.1 52.8 17.0 margins 17.9% 13.8% 17.0% Depreciation 14.7 14.3 2.7 11.7 26.0 EBIT 47.1 34.7 35.8 41.1 14.5 Interest 8.3 8.0 4.3 7.4 11.9 Other income 2.1 2.5-15.4 0.4 406.6 PBT 40.9 29.2 40.0 34.1 19.9 Tax 13.8 6.8 101.3 11.3 22.3 Tax rate 33.6% 23.4% 33.0% EO 0.0 0.0 0.0 PAT 27.1 22.4 21.2 22.9 18.7 Equity Capital 20.3 20.4 20.4 FV 1.0 1.0 1.0 EPS 1.3 1.1 22.1 1.1 19.6 2
Financials (consolidated) Consol P&L (Rs. C FY14A FY15A FY16E FY17E Balance Sheet (Rs Cr FY14A FY15A FY16E FY17E Net Sales 1095.9 1292.9 1571.3 1891.4 Share Capital 20.3 20.4 21.6 22.3 % change 43.4% 18.0% 21.5% 20.4% Reserves & Surplus 335.4 409.4 650.9 893.2 EBITDA 158.3 208.6 279.7 366.9 Net Worth 356.0 429.8 672.5 915.6 EBITDA margin 14.4% 16.1% 17.8% 19.4% Net Deferred Tax Lia 30.3 49.3 49.3 49.3 Depn & Amort 29.8 52.7 58.7 71.6 Total Loans 441.7 464.7 415.4 342.1 Operating income 128.5 156.0 221.0 295.4 Trade Payables 135.5 188.7 195.5 231.2 Interest 20.4 32.3 27.0 22.2 Provisions 12.3 17.5 18.2 19.2 Other Income 4.3 4.3 5.0 5.0 Other CL 16.2 45.8 20.3 23.9 PBT 112.4 128.0 199.0 278.1 Total Liabilities 992.0 1195.8 1371.2 1581.2 Tax 37.1 37.1 65.7 91.8 Net Fixed Assets 482.5 616.5 694.9 838.3 MI & EO 0.0 0.0 0.0 0.0 Capital WIP 124.6 62.0 75.0 60.0 PAT 75.2 90.9 133.4 186.3 Investments 0.2 0.2 0.2 0.2 PAT margin 6.9% 7.0% 8.5% 9.9% Cash & Bank 41.7 65.3 90.1 86.9 Sh o/s - Diluted 22.3 22.3 22.3 22.3 Inventories 174.2 224.5 229.0 270.8 Adj EPS 3.4 4.1 6.0 8.3 Debtors 110.9 132.6 172.2 207.3 Cash EPS 4.7 6.4 8.6 11.5 Loans & Advances 58.0 96.0 109.8 117.8 Qtrly-Consol Sept.14 Dec.14 Mar.15 Jun.15 Misc Exp 0.0 0.0 0.0 0.0 Revenue 307.6 319.7 354.6 345.9 Total Assets 992.0 1197.1 1371.2 1581.2 EBITDA 52.3 54.4 49.0 61.8 Cash Flow (Rs. Cr) FY14A FY15A FY16E FY17E Dep & Amorz 13.1 13.6 14.3 14.7 Op CF before tax 158.3 208.6 279.7 366.9 Op Income 39.3 40.9 34.7 47.1 Change in WC -32.8-22.1-76.1-44.6 Interest 8.0 8.9 8.0 8.3 Tax -37.1-37.1-65.7-91.8 Other Inc. 0.5 0.9 2.5 2.1 CF from Operation 88.3 149.5 137.9 230.6 PBT 31.8 32.8 29.2 40.9 Capex -282.2-124.2-150.0-200.0 Tax 9.7 9.2 6.8 13.8 Oth Inc & Investmen 4.3 4.3 5.0 5.0 EO 0.0 0.0 0.0 0.0 CF from Investing -277.9-119.8-145.0-195.0 PAT 22.1 23.6 22.4 27.1 Financing EPS (Rs.) 1.1 1.2 1.1 1.3 Diviend Paid -8.3-13.1-15.7-18.3 Performance Rati FY14A FY15A FY16E FY17E Share Capital 0.1-0.1 125.0 75.0 EBITDA margin (% 14.4% 16.1% 17.8% 19.4% Loans 171.3 23.0-49.3-73.3 EBIT margin 11.7% 12.1% 14.1% 15.6% Interest -20.4-32.3-27.0-22.2 PAT margin 6.9% 7.0% 8.5% 9.9% Others 47.0 16.4-1.1 0.0 ROE 21.1% 21.2% 19.8% 20.4% CF from Financing 189.7-6.1 31.9-38.8 ROCE 15.5% 16.5% 19.4% 22.6% Net Chg. in Cash 0.0 23.6 24.8-3.3 PAT growth 131.0% 20.8% 46.7% 39.7% Cash at beginning 41.7 41.7 65.3 90.1 Debt/Equity (x) 1.2 1.1 0.6 0.4 Cash at end 41.7 65.3 90.1 86.9 Valuation Ratio FY14A FY15A FY16E FY17E Per Share Data FY14A FY15A FY16E FY17E Price Earnings (x) 34.0 28.2 19.2 13.7 Adj EPS 3.4 4.1 6.0 8.3 Price/BV (x) 0.3 0.3 0.2 0.1 BV per share 15.9 19.2 30.1 41.0 EV / Sales 2.7 2.3 1.8 1.5 Cash per share 1.9 2.9 4.0 3.9 EV / EBITDA 18.7 14.2 10.3 7.7 Dividend per share 0.3 0.5 0.6 0.7 3
Disclaimer: Nirmal Bang Securities Private Limited (hereinafter referred to as NBSPL )is a registered Member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited and MCX stock Exchange Limited. NBSPL is in the process of making an application with SEBI for registering as a Research Entity in terms of SEBI (Research Analyst) Regulations, 2014. NBSPL or its associates including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by Analyst (in case any financial interest is held kindly disclose) NBSPL or its associates/analyst has not received any compensation from the company covered by Analyst during the past twelve months. NBSPL /analyst has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity of the company covered by Analyst. The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision. This document, at best, represents Analyst opinion and is meant for general information only. NBSPL, its directors, officers or employees shall not in any way be responsible for the contents stated herein. NBSPL 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 (Division of Nirmal Bang Securities Pvt Ltd) B-2, 301/302, Marathon Innova, Opp. Peninsula Corporate Park Off. Ganpatrao Kadam Marg Lower Parel (W), Mumbai-400013 Board No : 91 22 3926 8000/8001 Fax : 022 3926 8010 4
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