GRANULES INDIA LIMITED
Q3 FY 21 RESULTS ANALYSIS
Management
Krishna Prasad Chigurupati:Chairman & Managing Director
Harsha Chigurupati : Executive Director
Uma Devi Chigurupati : Executive Director
Priyanka Chigurupati : Executive Director
Q3 RESULTS :
|
Granules India (in Rs. Cr.) |
Dec'20 |
Sep '20 |
Dec '19 |
YOY |
QOQ |
|
Net Sales |
845 |
858 |
704 |
19.97 |
-1.59 |
|
Raw Materials |
413.61 |
418.02 |
346.88 |
19.24 |
-1.05 |
|
Increase/Decrease in Stocks |
-22.61 |
-56.9 |
0.17 |
-13400 |
-60.26 |
|
Employees Cost |
83.1 |
79.7 |
64.75 |
28.34 |
4.27 |
|
Depreciation |
36.85 |
36.06 |
38.99 |
-5.49 |
2.19 |
|
Other Expenses |
158.85 |
160.89 |
129.01 |
23.13 |
-1.27 |
|
P/L Before Other Inc., Int., Excpt. Items & Tax |
220.35 |
124.15 |
-100 |
-100 |
|
|
Other Income |
16.41 |
3.22 |
3.51 |
367.52 |
409.63 |
|
P/L Before Int., Excpt. Items & Tax |
174.71 |
223.57 |
127.66 |
36.86 |
-21.85 |
|
Interest |
7.24 |
6.27 |
6.73 |
7.58 |
15.47 |
|
P/L Before Exceptional Items & Tax |
183.88 |
217.3 |
120.94 |
52.04 |
-15.38 |
|
Exceptional Items |
0 |
-- |
-32.03 |
-100 |
|
|
P B T |
183.88 |
217.3 |
88.9 |
106.84 |
-15.38 |
|
Tax |
37.08 |
53.67 |
24.87 |
49.1 |
-30.91 |
|
N P T |
146.81 |
163.63 |
64.03 |
129.28 |
-10.28 |
|
Equity |
24.77 |
24.76 |
25.42 |
-2.56 |
0.04 |
|
Basic EPS |
5.92 |
6.6 |
2.52 |
134.92 |
-10.3 |
|
Diluted EPS |
5.9 |
6.56 |
2.51 |
135.06 |
-10.06 |
|
MP |
337.15 |
|
PE |
14.29 |
|
VOLUMES |
1852579 |
|
52 Week Range |
|
|
114.1 |
|
|
437.95 |
|
Granules India - Board declares Third Interim Dividend of 25 paise per share of face value of Re. 1/- each (Record Date : 9th Feb)
Gross Profit Margin increased to 53.7% from 50.7% YoY.
operating Margin increased to 25.1% from 23.2% YoY.
Net profit Margin increased to 17.4% from 9.1% YoY.
API has grown from 209 cr to 252 cr YoY.
PFI has grown from 116 cr to 171 cr YoY
FD has grown from 379 to 422 cr
Higher contribution from FD as it continues to grow in absolute terms from INR 379 Crsto INR 422Crs, up 11% YoY
❑PFI is growing at 48% YoY with increasing contribution from 16.4% to 20.2% YoY,on account of increasing penetration of PFIs as a category
❑API grew 20% YoY via on boarding of new customers
Quarter at a Glance:
Revenue up 20% YoY,
EBITDA margin expanded 190 bps YoY, followed by PAT growth of 129% YoY in Q3 FY21 on back of new launches and better utilization of Metformin block.
USFDA approval for Penicillamine Capsules 250 mg and Potassium Chloride ER tablets (Klor-ConM), manufactured via MUPS (multi-unit pellet system) Technology.
YoY ROE and ROCE improved to 29% and 32.4%, respectively
Four new launches such as Ramelteon, Dexmethyl phenidate HCIER and Potassium Chloride ER tablets (Klor-Con) from GPI and Guaifenes in ER tablets from GIL
Focused R&D investments in value accretive products emphasize our core strength and backward integrated manufacturing.
R&D spend at INR 223 Mn.
Received 2 ANDA approvals during the quarter
Total 35 ANDA approvals from USFDA (34 Final approvals and 1 tentative approval)
During the quarter, we acquired land in Genome valley near Hyderabad, for the construction of a PFI & FD manufacturing facility for~10 Bn units of solid orals, other finished dosage forms and additional capacity for PFIs. The facility will be operational in early FY24. The expected CAPEX is~INR 4000 Mn, to be incurred over the next 3 years.
Net Debt down by 22% YoY and Net debt to EBITDA stood at 0.7x vs. 1.4x as of December 2019
ROCE stood at 32.4%, up significantly on account of higher capacity utilization. Capacity increases came through quickly via addition of new modules and equipment with limited capital expenditure.
Increased contribution from higher margin FDs, Generics, while remaining backward integrated in APIs.
Strong Growth momentum witnessed across Geographies - led by North America
Finished Dosage and PFI segments grew 11% and 48%YoY
Contribution from PFI increased to 20.2% YoY
Higher-margin FD continues to grow in absolute terms from INR 3,794 Mn to INR 4,221 Mn, up 11% YoY
PFI is growing at 48% YoY, with increasing contribution from 16.4% to 20.2% YoY, on account of increasing penetration of PFIs as a category
API grew 20% YoY, via on-boarding of new customers
QOQ
Revenue declined 1.6% QoQ due to MEIS(Merchandise Export from India Scheme) benefits withdrawal.
The Centre has decided to discontinue the MEIS scheme from January 1, 2021, as it is not compliant with World Trade Organization norms. Exporters will then be reimbursed the duty paid on inputs through the new Remission of Duties or Taxes on Export Products Scheme, the rates for which are under formulation.
PAT declined 10% QoQ due to higher material cost and one-time product loss taken during the quarter.
Particulars Q3FY21 Q2FY21 QoQ
Reported Gross Margin 4,535 4,970
Reported Gross Margin % 53.7% 57.9%-4.2%
Adjustments
Add : One time product loss 1.2% - 1.2%
Less : MEIS benefits - -0.8% 0.8%
Less : On account of Air freight collected from customers -0.1% -0.3% 0.2%
Change in Inventory (Q2 additional inventory build-up is Rs 57 Crs vs Q3 is Rs 23 Crs) -0.8% -2.0% 1.2%
Forex rate reduction 0.5% 0.5%
*Adjusted Gross Margin % 54.4% 54.8% -0.3%
*The balance impact is from change in product mix
Adjusted EBITDA % 26.2%(Q3FY21) 27.1%(Q2FY21) -0.9%QoQ
CONTINUOUS IMPROVEMENT IN FINANCIAL METRILCS:
1. Net Debt has fallen from 7,888 cr to 6,121 cr (1.4X to 0.7X)
ROE has risen from 19.8% to 29%.
Free Cash Flow has fallen from 590 to 214 Mn
ROCE% has risen from 22.7% to 32.4%
Granules India Ltd subsidiaries : Granules (USA); Granules Pharmaceuticals, Granules Europe; Granules Lifesciences ;Granules Consumer Health;
•GIL: Presence across the entire pharmaceutical manufacturing value chain from API to finished dosages
•GranulesUSA: B2B Marketing & Distribution arm for APIs, PFIs and FDs (Rx & OTC) from GIL incorporated in 2003
•GCH: B2C Granules Consumer Health; our front end division for private label OTC products incorporated in 2014
•Gr.Pharmaceuticals Inc: R&D, manufacturing and front end division for marketing of Rx products in the US incorporated in 2014
•Gr. Europs Ltd:B2B Marketing & Distribution arm for APIs, PFIs and FDs from GIL incorporated in 2017
•Gr.Lifesciences Pvt Ltd:Manufacturing facility for new product launches
Multiple Drivers Provide Visibility for Long term Growth :Core Business :
Granules India Limited. Multiple Drivers Provide Visibility For Long-Term Growth
Core Business :-
✓Focus on volume-based products such as Paracetamol, Metformin HCl, Ibuprofen(core). Other products include Guaifenesin, Methocarbamol, Gabapentin, Losartan, Cetrizine and Fexofenadine
✓Expanding base business by entering into new geographies (Europe, Canada, South Africa)
✓Large scale manufacturing with sustained competitive advantage & secure supply source for the customers
✓Pioneered the concept of commercializing PFIs─suits large volume drugs
US GENERICS :
✓Fully-integrated infrastructure including R&D, manufacturing and marketing to enable “Make in America”
✓Business-to-Consumer model (B2C) through Granules Consumer Health(GCH)
✓Focus on developing controlled substances and niche/differentiated modified and extended-release products in varied dosage forms.
NEW PRODUCTS :
✓Filing new ANDAs (7-8 ANDAs and 2-4 dossiers per year and value added DMFs/CEPs/EDMFs)
✓Focus on developing controlled substances and niche/differentiated modified and extended-release products in varied dosage forms
✓Average launches 7-8 ANDAs / Dossiers per year
✓Focus on operational efficiencies and process innovation through R&D
CORE BUSINESS : GROWTH DRIVERS :-
1. Expanded to 8 molecules: Losartan, Fexofenadine and Cetrizine added to the existing core portfolio
2. Expanded capacities in high-volume products (API + FD): Paracetamol, Metformin, Ibuprofen, Guaifenesin, Methocarbamol
3. Ramp-up of utilization at new capacities to expand global market shares in these APIs and forward integrated from API to FD
4. Widening existing portfolio into several dosage forms: E.g. Paracetamol 500mg, Paracetamol 650mg, Metformin XR
5. Expanding market to other regions by extending our filings footprints in UK, Europe and Canada for core molecules.
EXPANDING THE CORE BUSINESS TO NON US MARKETS :
New capacity expansion: MUPS technology
What is MUPS technology
•Tablets, Capsules and other dosage forms which are prepared by compaction, encapsulation or blending of modified release coated pellets are based on MUPS (multi-unit pellet system) technology.
•Pellets are produced for the purpose of oral controlled-release dosage form having gastro resistant or sustained-release properties
•For such purposes, coated pellets are administered in the form of MUPS dosage forms. The coating material used is either sustained release or enteric release.
• GIL will invest INR 2,400 Mn over FY21 to FY22; to be funded entirely via internal accruals
•The products that will be manufactured in this block will be integrated with APIs from the Multi API block from Unit 5 in Vizag
•The MUPS block will have a capacity to manufacture 2.5 –5 Bn FDs per annum will be operational by Q3FY22
•Received approval for one product in FY21. This product is under production in an existing facility and will be launched in Q1 FY22.
Key focus areas for FY21:-
Granules India Limited. Key focus areas for FY21-23
Key focus areas for FY21
1.To ensure timely launches of 9 products expected in FY21 while also increasing the market share of existing products by passing on cost benefits realized through operational efficiencies
2. To ensure employee safety while increasing productivity and improve Regulatory compliance
3. To focus on Cash conservation and liquidity management To focus on Free cash flow generation and ensure reduction in gross debt
4. To focus on Working capital management with high focus on inventory management to ensure supply security
5. To focus on profitability through better capacity utilization and by enhancing product mix and operational cost efficiencies
6. To continue to rationalizing R&D portfolio while building towards sustainability
To ensure timely progress of the completion of new block construction in Gagillapur and other expansion activities.
STRENGTHS :
High Piotroski Score - Companies with strong financials
Rising Net Cash Flow and Cash from Operating activity
Company with high TTM EPS Growth
Effectively using its capital to generate profit - RoCE improving in last 2 years
Effectively using Shareholders fund - Return on equity (ROE) improving since last 2 year
Efficient in managing Assets to generate Profits - ROA improving since last 2 year
Growth in Quarterly Net Profit with increasing Profit Margin (YoY)
Company with Low Debt
Strong cash generating ability from core business - Improving Cash Flow from operation for last 2 years
Annual Net Profits improving for last 2 years
Book Value per share Improving for last 2 years
FII / FPI or Institutions increasing their shareholding
Recent Results : Growth in Operating Profit with increase in operating margins (YoY)
WEAKNESSES :
Negative Breakdown First Support (LTP < S1)
MACD Crossover Below Signal Line
MFs decreased their shareholding last quarter
Decline in Net Profit with falling Profit Margin (QoQ)
OPPORTUNITIES :
Companies with current TTM PE Ratio less than 3 Year, 5 Year and 10 Year PE
Highest Recovery from 52 Week Low
THREATS
Degrowth in Revenue, Profits and Operating Profit Margin in recent results (QoQ)
Increasing Trend in Non-Core Income
Insiders sold stocks
3 year CAGR growth
Revenue 22.90%
Net Profit 26.80%
Operating Profit 20.70%
Shareholding Pattern
Promoters pledge remained unchanged at 8.64% of holdings in Dec 2020 qtr.
Promoters holding remains unchanged at 42.04% in Dec 2020 qtr
Mutual Funds have decreased holdings from 0.14% to 0.11% in Dec 2020 qtr
Number of MF schemes increased from 3 to 4 in Dec 2020 qtr.
FII/FPI have increased holdings from 26.31% to 26.38% in Dec 2020 qtr.
Number of FII/FPI investors increased from 189 to 211 in Dec 2020 qtr.
