Granules India Ltd. delivered a better-than-expected performance in Q2 FY24. Production/sales activities have returned to normalcy after the resolution of an IT security issue. Further, shortage opportunities boosted U.S. business.
We cut our earnings estimate by 5% for FY24, factoring in a delay in certain launches in the U.S. and gradual utilisation of new facilities. We value Granules India at 14 times 12 months forward earnings to arrive at a target price of Rs 430.
Granules India is implementing efforts towards capacity addition and backward integration, and is enhancing product offerings for the regulated market, including some niche launches.
Accordingly, we expect a 16% earnings compound annual growth rate over FY23-25. Maintain ‘Buy’.