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Centrum Broking: Granules India - Exceptional Q1 Performance 

Centrum Broking: Granules India - Exceptional Q1 Performance

Brightly coloured pharmaceutical medication sit in this arranged photograph.  (Photographer: Chris Ratcliffe/Bloomberg)
Brightly coloured pharmaceutical medication sit in this arranged photograph. (Photographer: Chris Ratcliffe/Bloomberg)

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

Centrum Broking Report

Amid the extraordinary times Granules India posted record quarterly performance well ahead of our estimates. The record quarterly performance with revenue growth of 24% YoY was driven by spiked demand around the Covid-19 pandemic and spill-over from previous quarter along with market expansions in the core products. Improved product mix has contributed well to the quarter as Pharmaceutical Formulation Intermediaries (PFI) and Finished Dosages (FD)s contributed nearly 71% of sales taking gross margins to 60% and Ebitda margins to 25%. The quarter still has some impact of higher employee costs with gross margins overheads reversal. Also, Metformin ER 750 mg recall impacted the quarter. The core five products contributed 85% of revenues this quarter.

Management has expanded their guidance considering the strong demand and product mix, FY21E earnings growth at 30% and FY22E earnings growth at 25%. The new capex would be utilised to better operational levels offering early operating leverage. Future capex of the company would be entirely funded by internal accruals, FY21E nearly Rs 3.5 billion to Rs 4.0 billion and FY22E close to Rs 3.5bn. We have increased earnings by 13% for FY21E and FY22E, respectively incorporating the Ebitda improvement and increased formulation share.

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Centrum Broking Granules India - Q1FY21 Results Update.pdf

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