Granules India Comparison – Is It Better Than Competitors?

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The company will be evaluated considering a group of 5 peer companies according to the market classifications.

Granules India shares relative valuation will be done using our 5-10-5 -star rating methodology (5 companies, 10 parameters, Out of 5 stars).

From this, we will arrive at a combined peer rating for the company. 

Companies considered in this analysis are:

  1. Divi’s Labs
  2. Lupin
  3. Jubilant Life Sciences
  4. Granules India
  5. Aarti Drugs

About the Company:

Granules is an Indian pharmaceutical manufacturing company based in Hyderabad, India.

The company manufactures several off-patent drugs, including Paracetamol, Ibuprofen, Metformin, and Guaifenesin, on a large scale for customers in the regulated and rest of the world markets.

It entered the CRAMS segment, which focuses on contract research and manufacturing.

Granules has seven manufacturing facilities; six are in India while the seventh is through a joint venture with the Hubei Bio case in Wuhan, China. The company also has two research centers, at Hyderabad and Pune.

The Gagillapur facility is located near Hyderabad and has a Finished Dosage block, a PFI block, and a research & development facility.

Granules commissioned the world’s single largest PFI plant in Gagillapur in August 2003 with a batch size of 6 MT and an annual capacity of 7,200 MT per annum. The plant received its US FDA approval within six months of commissioning.

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1. Market Capitalization (★ ★ ☆ ☆ ☆)

Granules India Shares Relative Valuation and Peer Comparison

Market capitalization is calculated by multiplying the total number of a company’s outstanding shares by the current market price of one share.

Out of the 5 peer companies, Granules India has the second-lowest market capitalization after Divi’s, Lupin, and Jubilant Lifesciences.

This shows the below-average Enterprise Value amongst the peers. Therefore this category gets 2 stars in Granules India shares relative valuation.

2. Price/Earnings Ratio (★ ★★★☆)

Granules India Shares Relative Valuation and Peer Comparison

The price-earnings ratio is the ratio of a company’s share price to the company’s earnings per share. The ratio is used for valuing companies and to find out whether they are overvalued or undervalued.

P/E higher than Industry average means Overvalued and Lower than Industry average means Undervalued.

Its shares have the second-lowest positive P/E and it’s below the industry average, so its shares are undervalued on this parameter. Therefore this category gets 4 stars in Granules India shares relative valuation.

3. Price/Book Value Ratio (★ ★ ★ ☆☆)

The price-to-book ratio is a financial ratio used to compare a company’s current market price to its book value. Lower than average P/B shows undervalued and higher P/B shows overvalued.

Its shares have the third-lowest P/B amongst the competitors. Therefore this category gets 3 stars in Granules India shares relative valuation.

4.Dividend Yield (★ ★☆☆☆)

Granules India Shares Relative Valuation and Peer Comparison

The dividend yield of a share is the dividend per share, divided by the price per share. This shows how much dividend the company pays out.

The dividend yield above-average line is considered good and vice versa. It has the second-lowest dividend yield amongst its competitors.

Therefore this category gets 2 stars in Granules India shares relative valuation.

Also Watch: Granules India Beats Q2FY21 Estimates, Profit Rises 71%

5.Price/Sales Ratio (★ ★★☆☆)

The price-to-sales ratio calculated by taking a company’s market capitalization (the number of outstanding shares multiplied by the share price) and divide it by the company’s total sales or revenue over the past 12 months.

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The lower the P/S ratio, the more attractive the investment. It has the third-highest P/S ratio amongst the competitors which makes its shares highly undervalued.

Therefore this category gets 3 stars in Granules India relative valuation.

6.ROCE (★ ★ ★ ☆☆)

Granules India Shares Relative Valuation and Peer Comparison

ROCE is a financial ratio that determines a company’s profitability and the efficiency of capital use.

A higher ROCE implies a more economical use of capital and an above-average ROCE is considered a good investment. Granules India has the third-highest ROCE amongst its competitors and it is also near the average line.

Therefore this category gets 3 stars in Granules India’s relative valuation.

7. Return on Assets (★ ★ ★ ☆☆)

The return on assets shows the percentage of how profitable a company’s assets are in generating revenue. The higher the ROA better is the asset utilization by the company and the higher the efficiency.

It has the third-highest ROA amongst its competitors and it is also near the average line. Therefore this category gets 3 stars in Granules India shares relative valuation.

8. Price/ FCF Ratio (★ ☆ ☆☆☆)

This is calculated by dividing market capitalization by the free cash flow of the company.

A lower value for price to free cash flow indicates that the company is undervalued and its stock is relatively cheap.

Granules India has the negative Price/FCF ratio amongst its peers and its way below the Industry average line. This shows that Granules India shares are highly overvalued on this parameter.

Therefore this category gets 1 star in Granules India shares relative valuation.

9. Earnings Per Share (★ ★ ☆☆☆)

Granules India Shares Relative Valuation and Peer Comparison

Earnings per share (EPS) is a company’s net profit divided by the number of common shares it has outstanding. EPS indicates how much money a company makes for each share of its stock, and is a widely used metric to estimate corporate value.

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The higher the EPS higher is profitability.

Granules India is in the 3rd position with EPS also lower than the industry average. Therefore this category gets 2 stars in Granules India shares relative valuation.

10.Return on Equity (★ ★ ★ ☆☆)

Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity.

ROE is considered a measure of how effectively management is using a company’s assets to create profits.

Granules India has the 3rd highest ROE amongst the Peers and it’s also above the industry average. Therefore this category gets 3 stars in Granules India shares relative valuation.

The overall rating is arrived at by taking the average of the above 10 parameter ratings and rounded up if it is above 0.5 and rounded down if it is below 0.5.

The stock is undervalued if the rating is above 3 (i.e 4 or 5 stars), it is fairly valued if the rating is around 3 and is overvalued if the rating is below 3 (i.e 2 or 1 star).

The ratings are exclusive to each company so more than one company can have the same ratings within the peer group.

Overall Relative Rating:

GRANULES INDIA (2.6/5)

This means the stock is Slightly Overvalued at the current price levels.

★ ★ ★ ☆ ☆

 
Relative Valuation Summary  
Market Capitalization ★ ★ ☆ ☆ ☆
Price/ Earnings Ratio ★ ★ ★ ★ ☆
Price/ Book Value Ratio ★ ★ ★ ☆ ☆
Dividend Yield ★ ★ ☆ ☆ ☆
Price to Sales ★ ★ ★ ☆ ☆
ROCE ★ ★ ★ ☆ ☆
ROA ★ ★ ★ ☆ ☆
Price/ Cashflow ★ ☆ ☆ ☆ ☆
Earnings Per Share ★ ★ ☆ ☆ ☆
ROE ★ ★ ★ ☆ ☆
Overall Peer Rating ★ ★ ☆ ☆
Granules India Shares Relative Valuation and Peer Comparison


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