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Torrent Pharma Q1FY23 Review: Robust branded franchisee; margins to trend up

ICICIdirect Research 01 Aug 2022 DISCLAIMER

What's Buzzing

Torrent Pharma’s Q1FY23 revenues were in line with I-direct estimates while margin profile was better than our expectations.

Context

Revenues grew 10% YoY to Rs 2347 crore. Domestic formulations grew 14% YoY to Rs 1245 crore driven by outperformance of top brands together with new launches and market share gains across focus therapies while 20% YoY growth to Rs 184 crore in Brazil was witnessed due to strong growth in generic segment, performance of top brands and new launches. US business grew 12% YoY to Rs 299 crore mainly due to one-time settlement income of Rs 38 crore in this quarter. Growth was partially offset by 18% YoY decline in Germany to Rs 214 crore amid increase in competition and loss of tenders in previous quarters. EBITDA margins declined 139 bps YoY to 30.3%, above I-direct estimate of 28%. EBITDA grew 5% YoY to Rs 712 crore. Subsequently, adjusted profit improved 7% YoY to Rs 354 crore.

Our perspective

Torrent's branded businesses growth momentum was led by the India performance. The management's cost optimisation measures have helped to get back on track with respect to margins in this quarter while India and Brazil business continue to be on a strong footing. Torrent has initiated measures to improve price competitiveness in Germany. Torrent continues to impress thanks to thoughtful capital allocation and robust margin profile, which can be attributed to a global portfolio of branded generics. The company’s portfolio is finely balanced between India, Brazil, Germany and the US with India being the leader. We expect India and Brazil branded franchise to continue their outperformance.

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