Granules India, IOL Chemicals hit 52-week lows on weak Q2 results

Shares of Granules India and IOL Chemicals & Pharmaceuticals hit their respective 52-week lows, falling up to 10 per cent on the BSE in Monday’s intra-day trade, after the companies reported a disappointing set of numbers for the quarter ended September 2021 (Q2FY22).

IOL Chemicals, a leading manufacturer of pharmaceutical (APis) and specialty chemicals, slipped 10 per cent to Rs 487 after it reported 54 per cent year on year (YoY) decline in profit after tax (PAT) at Rs 31 crore in Q2FY22, due to weak operational performance. Total income, however, grew 4.6 per cent to Rs 548 crore from Rs 524 crore in the year-ago quarter. Earnings before interest, taxes, depreciation, amortization (Ebitda) margin contracted to 9.85 per cent from 22.13 per cent in Q2FY21.

The management said the company’s performance has been muted presently due to contraction in flagship API demand and volatility in raw material prices of Chemical products. It further stated that revenue from new products in pharma API has been getting positive response.

At 02:00 pm, the stock was trading 7 per cent lower at Rs 502 on the BSE. It has fallen below its previous low of Rs 516.35 hit on February 24, 2021. Moreover, the stock has corrected 40 per cent from its 52-week high level of Rs 807 touched on December 7, 2020.

Shares of Granules India, too, hit a 52-week low of Rs 285.80, down 8 per cent on the BSE in the intra-day trade today. It has fallen below its previous low of Rs 294.70 hit on March 19, 2021 and has plunged 35 per cent from its 52-week high price of Rs 438 on December 1, 2020.

In Q2FY22, the company’s PAT declined 50.7 per cent YoY to Rs 80.7 crore mainly due to an in -ine operational performance. Revenues grew 3.5 per cent YoY to Rs 888 crore, driven by new launches and higher market share of existing products. API business, however, de-grew 25.2 per cent YoY to Rs 191 crore. Ebitda margins fell 1286 bps YoY to 17 per cent amid lower gross margins and higher employee and other expenditure.

Granules said its Q2 business was unfavourably impacted due to difficulties in procuring raw materials, mainly from China due to Chinese dual energy policy and increased procurement prices for almost all items due to interruptions in supply of materials and increased logistics costs arising out of vessel shortage and port congestion in various part of the world.

“Gross margin drop from 57.9 per cent to 50.9 per cent was on account of reduction in margins of all major products especially Paracetamol due to increase in KSM prices and increased logistics cost. Price pressure in USA has also resulted in marginal drop in Gross margin for Core products. The entire loss of Gross margin for the current quarter was mainly absorbed by Granules,” the management said and added that it expects to pass on some of the increases to its customers from Q3FY22 onward.

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