This small-cap pharma laggard is a buy with 65% upside: Motilal Oswal

Motilal Oswal is bullish on the shares of drug firm Granules India, after the firm received an Establishment Inspection Report (EIR) from the US health regulator for the OmniChem facility at Vizag, Andhra Pradesh.

New Delhi, October 11, 2017: Motilal Oswal is bullish on the shares of drug firm Granules India, after the firm received an Establishment Inspection Report (EIR) from the US health regulator for the OmniChem facility at Vizag, Andhra Pradesh. The research and brokerage firm says that the Vizag facility will help the firm to make API (active pharmaceutical ingredients) in the second half of the year. Granules shares were trading at Rs 121.30 on Monday morning, up by more than 1.2% since the previous close. Motilal Oswal has a target price of Rs 200, implying an upside of 65% from the current market prices according to financialexpress.com.

According to a company statement, the OmniChem facility is operated by a 50:50 joint venture of Granules India and Ajinimoto OmniChem N V. “This facility was inspected by the USFDA in December 2016 and there were seven observations during the inspection. The facility manufactures Active Pharmaceutical Ingredients (API) intermediates,” Granules India said adding, “The United States Food and Drug Administration (USFDA) has issued an EIR for the company’s OmniChem facility.”

View live stock prices: Granules India; Dr Reddy’s Laboratories

The shares have returned a respectable 12% in an year which has seen the BSE Pharma index plummet by more than 6% since January. Notably, Granules shares have corrected by more than 15% in the last three months. The stock has lagged BSE Small-cap index which has returned a whopping 38% in the year so far. On Friday, Morgan Stanley (France) S.A. sold 17,67,051 shares of Granules India at Rs 119.37 on the NSE.

According to the reports published in financialexpress.com in late September, Morgan Stanley had raised the target price on the stock of Dr Reddy’s to Rs 3,133 from the earlier target of Rs 2,798, as the Hyderabad-based drug firm received an establishment inspection report (EIR) from the US Food and Drug Administration, for Formulation Srikakulam Plant (SEZ) unit II, Andhra Pradesh. Dr Reddy’s lab  shares have shed more than 22% in the year so far, and were trading at Rs 2,395.07 this morning, up by more than 0.8% since its previous close on Friday.