GRANULES - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 3.9

📊 Core Financials

• Revenue & Profit Growth: Quarterly PAT rose from 78.6 Cr. to 121 Cr. (↑ 54%), YoY profit variation at 191% shows strong growth momentum.
• Margins: ROCE at 10.9% and ROE at 9.14% are modest, indicating average efficiency.
• Debt Ratios: Debt-to-equity at 0.29 is manageable, balance sheet remains stable.
• Cash Flows: Dividend yield at 0.26% is low, but rising profits suggest healthy operating cash flows.

💹 Valuation Indicators

• P/E Ratio: 39.1, higher than industry PE of 30.6, indicating premium valuation.
• P/B Ratio: Current Price / Book Value ≈ 4.0, trading at a premium to book value.
• PEG Ratio: -4.55, distorted due to sharp earnings growth, making valuation less reliable.
• Intrinsic Value: Based on EPS (₹15.4) and industry PE, fair value ≈ ₹470–480, suggesting current price is overvalued.

🏢 Business Model & Competitive Advantage

• Granules India operates in pharmaceuticals, focusing on bulk drugs, formulations, and APIs.
• Strong presence in export markets with diversified product portfolio.
• Competitive advantage lies in cost-efficient manufacturing and scale, though margins remain modest.

📈 Entry Zone & Holding Guidance

• Entry Zone: Attractive below ₹500–520, closer to intrinsic value and DMA200 support (₹528).
• Long-Term Holding: Suitable for investors seeking pharma exposure, but valuation risk exists at current levels.

✅ Positive

• Quarterly profit growth (↑ 54%) and YoY profit variation (↑ 191%).
• Low debt-to-equity ratio (0.29).
• FII holdings increased (+0.85%), showing foreign investor confidence.

⚠️ Limitation

• ROCE (10.9%) and ROE (9.14%) are modest compared to industry leaders.
• P/E ratio (39.1) above industry average (30.6), indicating overvaluation.
• Dividend yield at 0.26% is low, limiting income potential.

📉 Company Negative News

• DII holdings reduced (-5.61%), showing declining domestic institutional confidence.
• Valuation stretched compared to intrinsic value.

📢 Company Positive News

• Strong quarterly and annual profit growth.
• FII holdings increased (+0.85%), reflecting foreign investor support.

🏭 Industry

• Industry PE at 30.6, lower than company’s valuation.
• Pharma sector benefits from global demand for generics and APIs.
• Competition remains high, with margin pressures across the industry.

🔎 Conclusion

• Granules India shows strong earnings growth and stable balance sheet, but valuations are stretched.
• Entry recommended below ₹500–520 for margin of safety.
• Long-term hold viable for pharma exposure, though modest return ratios and overvaluation warrant caution.