Torrent Pharmaceuticals Ltd. share price target

Torrent Pharmaceuticals Limited (TRP) engages in the research, development, manufacturing and marketing of generic pharmaceutical formulations in India, US, Germany, Brazil and internationally. The company...

India growth steady; acquisitions to enhance coverage Domestic branded formulations including CRAMs comprise 50% of sales. Acquisition of Elder Pharma's branded portfolio has added new therapies like neutraceuticals, gynaecology and helped fill up portfolio gaps. The Unichem acquisition has added branded portfolio comprising some power brands besides achievement of long term synergy benefits. Despite a YoY decline in IPM in Q1FY21 (-6% as per AIOCD), Torrent's portfolio has shown resilience (up 1% as per AIOCD) due to higher chronic contribution. We...

31 July 2020 Despite COVID-19-led industry-wide slowdown in Domestic Formulations (DF), Torrent Pharma (TRP) outperformed owing to its strong presence in the Chronic segment. The Germany business is expected to see revival 2HFY21 onwards. Growth in the US hinges on the Dahej/Indrad regulatory resolution. from COVID-19-led weakness in the India/Brazil business, b) the Germany business returning to normal, and c) reduced opex aiding better profitability. We value TRP at 24x 12M forward earnings and roll our TP to INR2,565. Maintain Neutral on limited upside from current levels. ROW sales grew 31% YoY to INR2.3b (11% of sales), driving overall growth in revenue. India sales grew 2% YoY (INR9.3b; 45% of sales). Brazil revenue (7% of sales) was down 20% YoY to INR1.4b. In constant currency, Brazil sales were steady on a YoY basis.

Valuation and Risks: We downgrade our Revenues by 4.4% / 4.8% for FY21E / FY22E due to downgrade across regions.

India growth steady; acquisitions to enhance coverage Domestic branded formulations including CRAMs constitute 50% of sales. The acquisition of Elder Pharma's branded portfolio has added new therapies like neutraceuticals, gynaecology and helped fill up portfolio gaps. The Unichem acquisition has added branded portfolio comprising some power brands besides achievement of long term synergy benefits. We...

Tepid Revenues, Near Term Outlook Uncertain: Revenues for the quarter increased by 5% to Rs19.5 bn due to tepid performance in Europe, Brazil and US.

While India continue to lead growth (pre-buying in March aided growth, in-line), exports were a drag. Gross margin at 72.4% was a function of strong growth in India, leading to impressive EBITDA margin of 28.2% (our estimate: 25.4%). Though company remains confident of outperforming IPM growth, we remain wary of the exports (US 2 key facilities under WL and OAI, Brazil adverse currency and batch traceability regulations in Germany) given the weaker outlook....

On the business front, despite the nationwide lockdown, domestic growth is expected to remain more or less stable. Exports growth, barring for one or two months due to congestion in all major ports globally, is also expected to remain strong due to 1) currency benefit, 2) slowdown in competition due to delay in new approvals that will be beneficial for existing players and 3) expected demand continuum across the world despite Covid-19. Some windfall is also expected in some critical productsa case in point is Hydroxychloroquine, a malaria drug that is likely to be repurposed as a prophylaxis for Covid-19 treatment in some cases....

Visible Growth in Revenues and MarginsTorrent Pharma s woes in various markets appears to be receding and is all set to show double digit topline growth in key markets which will give impetus to increase in margins.

Torrent Pharmaceuticals Limited (TRP) engages in the research, development, manufacturing and marketing of generic pharmaceutical formulations in India, the US, Germany, Brazil and internationally. The...