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Like my repeated BUY recommendation on KAVERI SEED COMPANY in last year from a level of Rs.272/- onwards ,this year it is GRANULES INDIA for the fourth time even after an appreciation of about 40 % from the initial rate.I strongly feel this Hyderabad based Pharma company is still ignored by the market participants.This 650 Cr company ( Consolidated) is operating in API’s,PFI’s and Finished Dosages.Last year Granules posted a net profit of Rs.30 cr , a growth of 43 % over previous year. Its turnover showing a CAGR of 28% in last five years which is exactly double of the average industry CAGR in these period.In FY 2011-12 , revenue growth in API division is 20% ,PFI 27 % and FD 83%.Currently company having 6 API products with a production capacity of 18000 TPA ,40 PFI products with 18000 TPA and 14 FD products with 18 Bn .What is really exciting is the upcoming increase in this production capacities where company’s API production will rise by 20% PFI by 200 % and FD capacity by 300%. Granules already made firm arrangements with MNC’s to sell these expanded capacity.Result of this expansion will start to reflect from the second quarter of this financial year itself.In addition to this ,Granules formed a 50:50 joint venture with Belgium based Ajinomoto Omnichem to produce niche low volume high price API’s .This new facility will be completed by the end of 2013 at Visakhapatnam and start commercial production from next FY.Company having an ambitious target of Rs.5000 Cr turnover by 2017.Granules posted an EPS of Rs.14.90 and declared a dividend of 20 % for FY 2011-12.
Currently promoters holding about 41 % stake and FII's and institutions another 35 % .In recent months promoters are aggressively hiking their stake through open market purchases which is another important point to note.
CONSOLIDATED FULL YEAR
Since company is exporting about 80% of its production ,depreciation of currency is also expected to help the company to improve its bottom line.A clean and transparent management with higher standards of corporate governance makes Granules India a preferred pick from the mid/small cap space.CMP is Rs.110/-