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.
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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.
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