Granules India Q1 Results Review - IT Issue Adversely Impacted Earnings: Motilal Oswal

Motilal Oswal Report

Granules India Ltd. delivered a miss on earnings in Q1 FY24, as the company’s financial performance was adversely impacted by the cyber security breach that occurred in May 2023.

Granules India remains on track to build process for backward integration for core molecules (paracetamol/Metformin). We cut our earnings estimates by 12%/4% for FY24/FY25, factoring in-

1. the adverse impact of IT interruption (which might be extended for two more quarters), and

2. the delay in product launches.

We value Granules India at 13 times 12 months forward earnings to arrive at a price target of Rs 370.

While the FY24 performance has been adversely impacted by the IT issue, leading to reduced revenue and increased working capital requirements, Granules India remains on track to-

1. building a product pipeline for regulated markets,

2. improving profitability once the key starting material plant for paracetamol and Metformin is commercialised in FY25 and additional capacity for core molecules as well as differentiated molecules.

We reiterate our 'Buy' rating on the stock.

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