Granules India – II

I valued Granules back in July post their annual results and found it to be undervalued. I did not invest in it as the margin was not good enough. I kept tabs on it over the last 5 months and this is my valuation of Granules post their Q2 results.

Numbers and Narratives

Granules India is a small pharmaceutical company that primarily makes its revenues from the sale of high volume – low margin generic drugs in the US and around the world. They are also investing into R&D to improve that core business and venture out into niche products. I expect them to be a high growth company in the near term and maintain their industry average margins in that time.

The core numbers that I arrive at based on the story are

  • Compounded revenue growth for next 5 years = 15% (20% TTM)
  • EBIT margin in year 10 = 18% (18% industry average)
  • Initial cost of capital = 10.20%


I’ve used the above numbers along with the financial information to compute my DCF valuation for Granules India as seen below.

As you can see, the valuation price came out to ₹341.30, about 10% higher than the last traded price of ₹311.90.



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