- 07 Nov 2024
- ICICI Securities
GRANULES INDIA Q2FY25- VOLUNTARY PRODUCTION STOPPAGE HURT NUMBERS
News: Revenues de-grew ~19% YoY to ₹ 967 crore, due to voluntary stoppage at the Gagillapur facility to reassess the potential risk on account of the USFDA observations. On segmental front, Formulations grew 1% YoY to ₹ 749 crore, driven by new products in the US and other geographies. APIs (APIs + PFIs), on the other hand declined ~51% to ₹ 218 crore led primarily by higher customer inventory and price erosion. Gross Profit, however was down just 2% YoY to ₹ 599 crore (margins stood at 62%, up 1036 bps YoY) driven by better product mix (higher formulations sales) and prioritized sales of high-margin products within formulations. EBITDA de-grew ~5% YoY to ₹ 203 crore due to lower sales and higher fixed overheads and EBITDA margins stood at 21% (313 bps improvement). PAT de-grew 28% YoY to ₹ 97 crore.
Views: As per management, 45 days of production was hampered at Gagillapur facility and the production was resumed in October. The management remains optimistic about the outcome which is expected in December. While there will be some impact in Q3, Q4 is expected to be normal. The Gagillapur facility is the largest for Granules but it is already operating at ~90% capacity and the company over the years has added other facilities aa well. It plans to file 6-7 products in the US every year. The company is also focusing on Oncology as a segment with dedicated API and formulations block at Vizag. It has already announced an aggressive Capex of ₹ 700 crore which includes manufacturing of Paracetamol and Metformin KSMs and intermediates via green route. We will keep watch on the USFDA outcome besides progress on the margins front as well as execution of the Capex.
Impact: Neutral