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Granules India surges 9% on drug approval

This is the first approval for Granules from its US site from where it aims to file value added products.

Shares of Granules India have surged by 9% to Rs105 on the back of the USFDA approval to its Methylergonovine 0.2 mg Tablets. This is a low competition drug with sizable volumes and launch of this product will be beneficial to Granules India.

The approval has also come from its US facility, which is also positive for the company, as it will start building pipeline form the US facility located in Virginia. This is an acquired facility and company is planning to start filling value added products from this site. The plan is to develop 5-6 ANDAs per year. As company starts launching products from this site, there will be operating leverage that it will generate leading to margin expansion.

Despite today’s 9% gain in the stock, Granules still is attractively valued at 9.2x FY20E EPS. We believe that the company will be beneficiary of Trump’s policy to boost the competition in the sector as small companies like Granules India will have opportunity to get in the products, which large companies feel unattractive. They are also the competitors to the large generic companies.

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