GRANULES - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 05 Nov 25, 7:43 am

Fundamental Rating: 3.7

📊 Financial Overview: Granules India Ltd maintains a solid financial base with a market cap of ₹13,718 Cr and a debt-to-equity ratio of 0.26, indicating moderate leverage. The company posted a PAT of ₹78.6 Cr this quarter, slightly up from ₹72.7 Cr, though the YoY profit variation is -16.2%, suggesting margin pressure. Return metrics are modest, with ROCE at 10.9% and ROE at 9.14%, reflecting average capital efficiency.

💹 Valuation Metrics: The stock trades at a P/E of 48.5, above the industry average of 33.1, indicating a premium valuation. With a Book Value of ₹140, the P/B ratio is ~4.04. The PEG ratio of -5.64 suggests earnings contraction, which raises caution. Dividend yield is modest at 0.25%.

💊 Business Model & Competitive Advantage: Granules India is a vertically integrated pharmaceutical company specializing in APIs, intermediates, and finished dosages. Its scale, cost efficiency, and global regulatory approvals provide a competitive edge. The company benefits from consistent demand for generics and expanding global reach, though margin volatility remains a concern.

📈 Technical Indicators: RSI at 64.5 suggests the stock is approaching overbought territory. MACD at 11.1 indicates bullish momentum. The stock is trading above both its 50 DMA (₹538) and 200 DMA (₹516), showing medium-term strength. However, volume is significantly below average, hinting at reduced short-term interest.

🎯 Entry Zone: A favorable entry range would be around ₹530–₹550, offering a better margin of safety and aligning with technical support levels.

🕰️ Long-Term Holding Guidance: Granules India is a stable pharma player with global exposure and operational scale. Long-term investors can consider accumulating on dips, especially if earnings stabilize and margins improve.

✅ Positive

• EPS of ₹12.2 supports consistent earnings performance.
• FII holding increased by 0.85%, indicating foreign investor confidence.
• Stock has gained 71.0% from its 52-week low of ₹412.
• MACD and DMA trends suggest medium-term bullish momentum.

⚠️ Limitation

• PEG ratio of -5.64 indicates earnings contraction.
• ROCE (10.9%) and ROE (9.14%) are below industry leaders.
• Dividend yield of 0.25% offers minimal income support.

📉 Company Negative News

• DII holding declined by 5.61%, signaling reduced domestic institutional sentiment.
• Volume below average may reflect short-term caution.

📈 Company Positive News

• Quarterly PAT improved sequentially from ₹72.7 Cr to ₹78.6 Cr.
• Strong regulatory approvals and global footprint support long-term growth.

🏭 Industry

• Pharma sector benefits from global demand, regulatory-driven innovation, and cost-efficient manufacturing.
• Industry P/E of 33.1 reflects moderate valuation across peers.

🧾 Conclusion

• Granules India is a well-established pharma company with global reach and operational efficiency.
• Valuation is slightly stretched; consider accumulating near ₹530–₹550.
• Ideal for long-term investors seeking exposure to generics and global pharmaceutical markets.