Motilal Oswal Recommends Buy on Granules India with Target Price of Rs 475: Strategic Initiatives and Positive Outlook
Overview:
Motilal Oswal, a reputable financial institution, has expressed a bullish outlook on Granules India (GRAN) and recommends a ‘Buy’ rating on the stock. The target price set for GRAN is Rs 475, as indicated in Motilal Oswal’s research report dated January 23, 2024. The report provides an analysis of GRAN’s recent performance, strategic initiatives, and the overall market outlook.
Key Insights:
- In-Line Performance in 3QFY24: Granules India delivered an in-line performance in the third quarter of the fiscal year 2023-24. The report acknowledges the balanced performance, with challenges in the API and intermediates (PFI) segments being offset by strong traction in the formulation (FDF) segment.
- Segment-wise Performance: The inferior performance in the API and intermediates segments was mitigated by superior traction in the formulation segment. The report emphasizes that the higher share of the formulation segment has positively impacted profitability on both a Year-on-Year (YoY) and Quarter-on-Quarter (QoQ) basis.
- Backward Integration Projects: Granules India has strategically undertaken backward integration projects for its core products. According to the report, these projects are progressing as planned, reflecting the company’s commitment to enhancing its position in the market.
- Earnings Estimate Adjustments: Motilal Oswal has made adjustments to its earnings estimates for FY24, FY25, and FY26. There is a reduction of 2%, 5%, and 5%, respectively. These adjustments consider factors such as inventory corrections implemented by customers in the Latin American (LATAM) region and increased competition in the Paracetamol market in Europe.
Outlook and Valuation:
Motilal Oswal values GRAN at 14 times the 12-month forward earnings to arrive at a target price of INR 475. The positive outlook on GRAN is based on several factors, including a healthy ANDA pipeline for the US market, expanding presence in the manufacturing value chain for core molecules, and a higher share of the FDF business. Motilal Oswal maintains a ‘Buy’ rating on GRAN.
Conclusion:
Investors are encouraged to consider Granules India as a potential investment opportunity, given its strategic initiatives, positive segment-wise performance, and the overall positive outlook presented in Motilal Oswal’s research report.
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