At a Glance

Shree Ganesh Remedies (SGRL) just reported a Q1 FY26 profit slump of 25.8% YoY with net profit at ₹3.45 crore, while sales flatlined at ₹24.7 crore. The stock is barely clinging to ₹576, down 39% from its ₹950 high. Add to this the GST summons over expired stock and suddenly this small-cap pharma feels like it’s starring in its own Breaking Bad spinoff – Breaking Margins. The P/E of 33.8 is still rich, margins have thinned, and cash flows look shaky. But hey, they still have 72.8% promoter holding, so someone’s confident… or trapped.

Introduction

Pharma companies usually boast about curing diseases. Shree Ganesh Remedies seems to be catching one – margin flu. Once hailed as a high-growth small-cap with stellar OPM, it’s now struggling to keep profits healthy. Revenue stagnated this quarter, OPM fell to 29.6% (from 40% in March), and PAT crashed by a quarter. Throw in a pending ₹88.6 lakh GST liability and the market is understandably giving it the side-eye.

Still, SGRL remains a niche player in drug intermediates with juicy historical growth (10-year profit CAGR 34%). But can it fight the infection of slowing growth, rising compliance issues, and investor fatigue? Let’s inject some analysis.

Business Model (WTF Do They Even Do?)

SGRL makes pharmaceutical intermediates and specialty chemicals – basically the “ingredients” that bigger pharma uses to make finished drugs. Their ISO 14001-certified facilities churn out complex molecules catering to domestic and international clients. Think of them as the Michelin-star kitchen that supplies gourmet spices to big pharma restaurants.

The model is B2B, high-margin, and innovation-heavy, but also capex-sensitive. Unlike API makers, intermediates players are highly dependent on a few large customers, leading to revenue volatility. Add environmental compliance, currency swings, and raw material costs – and suddenly your chemistry lab feels like a minefield.

Financials Overview

• Revenue: ₹24.7 crore (flat, -0.4% YoY)
• Operating Profit: ₹7.3 crore (down 26% YoY)
• OPM: 29.6% (vs 40.4% last quarter)
• Net Profit: ₹3.45 crore (down 25.8% YoY)
• EPS: ₹2.69 (vs ₹3.62 YoY)

For FY25: Revenue ₹109 crore, PAT ₹23 crore, EPS ₹18. OPM 36%.

Commentary: Profit slump despite flat sales screams cost pressure. With GST summons and stagnant top line, this quarter doesn’t inspire confidence. ROCE at 19.5% is decent but trending lower.

Valuation – Fair or FOMO?

Current Price: ₹576
TTM EPS: ₹17.06
P/E Calculation:

• Using TTM EPS → P/E ≈ 33.8
• Using annualized Q1 EPS (₹2.7 × 4 = ₹10.8) → P/E ≈ 53 (yikes)

Fair Value Range:

1. P/E Method: Assuming sustainable EPS ₹14–16, fair P/E 20–22 → FV = ₹280–₹350
2. EV/EBITDA: FY25 EBITDA ₹38cr, EV/EBITDA ~10x → FV ≈ ₹400
3. DCF: Conservative growth 10%, WACC 12% → FV ≈ ₹380

🎯 Fair Value Range: ₹300–₹400. Current price is premium – like paying ₹600 for a paracetamol strip.

What’s Cooking – News, Triggers, Drama

• GST summons: ₹88.6 lakh liability dispute.
• Margins under pressure: raw material or pricing issues.
• No new capacity announced; growth catalysts missing.
• Promoter stake increased to 72.8% (supportive, but liquidity tight).
• Zero dividends – retaining cash, but where’s the bang?

Balance Sheet (Auditor’s Stand-Up)

Audit Punchline: Low debt, healthy net worth – balance sheet looks fit. But watch inventory days (224!) – stocks are aging like fine wine… or expired medicine.

Cash Flow – Sab Number Game Hai

Stand-Up Audit: OCF decent, but heavy investing keeps cash tight. Net cash turned negative in FY25 – not fatal, but needs monitoring.

Ratios – Sexy or Stressy?

Commentary: Declining ROE + high P/E = stress. Margins still okay, but trend is downward.

P&L Breakdown – Show Me the Money

Remark: Revenue shrank 13% in FY25. This isn’t the growth pharma story it once was.

Peer Comparison

Commentary: Compared to giants, SGRL trades at a premium P/E for a shrinking revenue base – risky bet.

Miscellaneous – Shareholding, Promoters

• Promoters: 72.8% (increased – good sign)
• FIIs: negligible (they’re not touching it)
• Public: 27.2%

Promoter buying during a downtrend? Either they know something or they’re doubling down on a sinking ship.

EduInvesting Verdict™ (500 Words)

Shree Ganesh Remedies is a small-cap pharma gem that’s lost some shine. Historically, it dazzled with 34% profit CAGR and stellar OPM. But FY25 was a reality check – sales dropped 13%, margins compressed, and now Q1 FY26 adds a 26% profit drop to the mix. Investors expected another “Divi’s Labs in the making”; instead, they got a chemistry experiment that’s starting to smoke.

Strengths:

• Niche player in drug intermediates with high OPM (~30%).
• Strong promoter backing (72.8% stake).
• Healthy balance sheet with low debt.

Weaknesses:

• Revenue stagnation, margin erosion.
• High inventory days → working capital drag.
• Small customer base risk.

Opportunities:

• Rising demand for specialty pharma ingredients.
• Potential contract wins could revive growth.
• Low debt gives room for expansion.

Threats:

• GST compliance issues and regulatory risks.
• Stiff competition from bigger pharma intermediates.
• P/E premium unjustified if growth remains weak.

Conclusion:
SGRL is like a high-potency pill – effective in small doses but dangerous if overdosed. The stock isn’t cheap, growth is shaky, and compliance clouds loom. Long-term believers may hold, but fresh investors should demand a discount (₹350–₹400) before swallowing this bitter pill. For now, watch upcoming quarters like a hawk – one good molecule could flip the story, but until then, caution rules.

Written by EduInvesting Team | 01 August 2025

SEO Tags: Shree Ganesh Remedies, SGRL, Q1 FY26 results, pharmaceutical intermediates, small-cap pharma analysis