Monday, 9 October 2017

Granules India Gains 4% as Motilal Oswal expects over 50% return on strong Financials

Granules India share price rallied nearly 4 percent intraday Monday as Motilal Oswal believes the stock has the potential to deliver more than 50 percent return in the next 12-18 months on the back of multiple re rating and strong EPS CAGR of around 30 percent till FY20.

The research house has a buy call on the stock with a target price of Rs 200 per share as it expects 35 percent profit CAGR over FY17-20.
It said this strong growth will be driven primarily by ramp-up of the base business (led by capacity expansion), shift in product mix, Omnichem JV, and OTC business expansion.

Although FY19 will be the first year of US business sales, the full impact of investments in the US business will be visible from FY20, it added.


Currently, its API plant is running at 100 percent capacity and pharmaceutical formulation intermediates (PFI) at 75-80 percent utilisation.

The company had planned to increase its API capacity by around 40 percent and PFI capacity by more than 20 percent (expansion plan to get over in FY18), which will help fuel growth in formulations (as Granules is dependent on backward integration). This will help grow the base business at mid-to-high teens until at least FY20 (around 27 percent CAGR over FY17-20 versus around 7 percent in FY17), Motilal Oswal said.

Granules plans to file around 25 ANDAs in the US by FY19. Of this, around 12-15 complex ANDAs will be filed from its US-based Virginia facility and rest from the India facility in Gagilapur. The company has already filed two complex generic ANDAs from its Virginia facility in March/April-17 (market size of USD 500 million).

Of these, in 1 product, the company could be the only generic player in the near term, the research house said.

It expects the 50:50 joint venture between Granules and Ajinomotos subsidiary Omnichem to record revenue of around Rs 450 crore, with EBITDA margin of more than 30 percent in FY20.

Sobha Surges 9% as CLSA Maintains buy after Strong Pre-Sales Data

Sobha share price rallied nearly 9 percent intraday Monday as global brokerage house CLSA has maintained its buy rating on the stock with a target price of Rs 525 after strong pre-sales data.

The Bangalore-based real estate company during the second quarter achieved new sales volume of 8.61 lakh square feet total valued at Rs 675.1 crore with an average realisation of Rs 7,840 per square feet.

The company has achieved this growth without launching any new projects during the quarter.

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This showed the growth of 5.6 percent and 8.3 percent in sales volume and total sales value compared with previous quarter, respectively while on year-on-year basis, sales volume was marginally higher and total sales value increased by 22.5 percent in Q2FY18.

Sobha said its share of sales value stood at Rs 592.7 crore (out of Rs 675.1 crore) with an average realisation of Rs 6,883 per square feet, up 5.3 percent QoQ and 14.4 percent YoY.
"The new sales value of Rs 592.7 crore achieved during the second quarter of 2017-18 is highest in past 10 quarters," it said.

The growth was supported adequately by an improved performance in the Kochi market followed with a consistent traction in other markets.

CLSA said steady execution & good portfolio helped the company to perform well. It expects pre-sales to do well for the next few quarters.

At 10:34 hours IST, the stock price Sobha was quoting at Rs 416.95, up Rs 25.70, or 6.57 percent.

Gitanjali, Titan, TBZ rally 4-6% as jewellery purchases above Rs 50,000 won't need PAN

Jewellery stocks rallied 2-20 percent on Monday after the Government withdrew its GST notification on gems and jewellery.

Gitanjali Gems, PC Jeweller, Titan Company, Tara Jewels and TBZ gained 4-7 percent as Permanent Account Number (PAN) card and Aadhaar card will no longer be mandatory on the purchase of jewellery for over Rs 50,000.

This raised hopes for likely increase in demand for jewellery in Diwali festival (especially Dhanteras day).

Dhanteras is considered to be an auspicious day for buying gold, silver and other valuables and is largely celebrated in North and West India.

The government has taken this decision at its 22nd GST Council meeting on Friday.


During last Dhanteras, gold and jewellery sales had risen by up to 25 percent on higher demand in view of good monsoon and favourable price levels, as per the industry body data.

CLSA said the government deferring PMLA for the sector came at the right time, given the ensuing festive season.

Titan remained its preferred pick. It has a buy call on the stock with a target price of Rs 700 per share.

In a notification issued on August 23, the government had brought jewellery dealers under the purview of the Prevention of Money Laundering Act 2002 (PMLA) and were told to report on buyers making purchases over Rs 50,000. Therefore, PAN and Aadhaar cards were made mandatory as part of 'Know your customer (KYC)' rule.

India is the world's largest gold consumer and imports a sizeable chunk of its total annual consumption of around 900-1,000 tonne.

No firecrackers for Delhi-NCR: SC

The Supreme Court on Monday ruled that there will be no sale of firecrackers during Diwali, as it restored a November 2016 order banning the sale and stocking of firecrackers in Delhi and National Capital Region.

A bench headed by Justice A.K. Sikri, while restoring the order, said: "We should see at least in one Diwali the impact of a cracker-free festivity."

However, the court said that the September 12, 2017 order lifting the ban on the sale and stocking of firecrackers in Delhi NCR will be back into effect from November 1.

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