Granules India - Q3 Result Updates

Financial Results with Results Press Release & Limited Review for Dec 31, 2013
Link: Click Here

As expected, strong set of numbers delivered by Granules India, with a huge growth in net profit, which was the reason for stock reaching these 52 weeks high levels and sustaining there.

On Standalone basis,
Revenues stands at 262 Cr Vs 173 Cr YoY, which is a growth of 50.5%.
Net Profit stands at 23 Cr Vs 5.4 Cr YoY, which is a growth of almost 325%.
EPS for the first time, goes above 10, and is precisely at 11.39.

On Consolidated basis,
Revenues stands at 284 Cr Vs 195 Cr YoY, which is a growth of 46%.
Net Profit stands at 21.8 Cr Vs 5.8 Cr YoY, which is a growth of almost 275%.
EPS works out to be 10.8.

So far this year, the company has reported sales of 778 Cr. Looking at this number, and with good expectation in coming quarter as well, I expect the company to post annual sales of close to 1090 Cr for the full year, which will be above their target of 1000 Cr. In terms of profit, I expect it to be somewhere around 75 Cr, which again, would be way above their expectations.
EPS for the full year will be around 36, which means, at current market price of aout 220 Rs, it is trading at a P/E multiple of 6.

Looking at numbers, its tough to see that consolidated numbers are slightly sub-dued when compared with standalone numbers in terms of growth and margins. But Granules, being a company which is generating 90% of its revenues from standalone unit only, the performance of subsidiaries hardly matters, as of now. It will take some time for subsidiaries to perform well, and contribute to increasing sales and profit figures.

The company still needs to focus on improving margins. Even with huge growth in net profit, they are still lagging when it comes to net profit margins, as compared to their peers. So I am expecting further such growths in net profit going ahead. If that happens, there will be a huge re-rating on the counter. If you check the numbers of Ajanta Pharma, you will find that they are having similar sales figure, but net profit of Ajanta is 3 times the net profit of Granules, this quarter. It used to be around 5-6 times that of Granules earlier. Now that Granules has started posting good net profit, it is going in right direction.

My Views:
Most of things are clear from stats that I mentioned above, and I, because of that, continue to be very positive on the stock with a longer term view. With result just announced, and with highly volatile market conditions, you can expect the stock to trade violently on either side for few days. But those who are seriously long term investors, can invest around any levels from 200-250, and hold it, till it becomes a 5000 Cr revenue generating organization as promised by management, someday. :-)
Obviously, we wont do that blindly. We will stay updated with every news about the company and our actions will follow accordingly.

GRANULES INDIA - Redefining Partnership

httpv://www.youtube.com/watch?v=NDSX9SvcWdQ