loader2
Partner With Us NRI
Torrent Pharmaceuticals Ltd>
  • CMP : 2,831.3 Chg : -26.85 (-0.94%)
  • Target : 1,720.0 (10.47%)
  • Target Period : 12-18 Month

27 Jan 2023

Branded business continues to influence numbers…

About The Stock

Incorporated in 1959, Torrent remains a key play in branded generics (~60% of sales) with strong India franchise and growing exports traction.

  • Revenues – India including CRAMs (59.8%), Brazil (8.3%), US (11.3%) and Germany (10.4%)
  • Torrent is the eighth largest domestic player and is ranked in top 10 for CVS, CNS, V&M, GI and anti-diabetes therapies in India
Q3FY23

Growth in revenues boosted by branded generic markets i.e. India and Brazil.

  • Revenues grew 18.3% YoY to ₹ 2491 crore
  • EBITDA margins expanded ~361 bps YoY to 29.1%. EBITDA increased 35.1% to ₹ 724 crore
  • PAT increased 13.73% YoY to ₹ 283 crore
What should Investors do?

Torrent’s share price has grown at a CAGR of 15.90% over the past three years.

  • We maintain HOLD as the current price factors in potential upside from the branded business
Target Price and Valuation

Valued at ₹ 1720 i.e. 32x FY25E EPS of ₹ 53.8

Key Triggers for future price performance
  • In India, Torrent has expanded field strength by ~300 MRs. Also, it forayed into fast growing trade generic segment for acute therapies
  • Torrent has a good presence in Brazil and expects traction for new launches in branded space while Germany tender business to recover in H2FY23
  • Awaiting clearance for Dahej and Indrad facility from the USFDA. New launches are key to offsetting persisting price erosion in business
Alternate Stock Idea

Apart from Torrent, in healthcare coverage we like Cipla.

  • Cipla has a long-drawn strategy of targeting four verticals viz. One-India, South Africa & EMs, US generics & specialty and lung leadership
  • BUY with a target price of ₹ 1290

Key Financial Summary

Particulars FY20 FY21 FY22 5 Year CAGR(FY17-FY22) FY23E FY24E FY25E 2 Year CAGR (FY23E-FY25E)
Revenues 7,939.0 8,005.0 8,508.0 9,557.5 9.8 10,645.2 11,674.8 10.5
EBITDA 2,170.0 2,480.0 2,431.0 2,836.6 16.0 3,178.6 3,502.5 11.1
EBITDA margins (%) 27.3 31.0 28.6 29.7 - 29.9 30.0 -
Net Profit 1,025.0 1,252.0 1,084.4 1,229.9 12.6 1,527.1 1,821.4 21.7
EPS (|) 30.3 37.0 32.0 36.3 - 45.1 53.8 -
PE (x) 51.4 42.1 67.8 42.8 - 34.5 28.9 -
RoNW (%) 21.2 21.4 18.2 17.9 - 19.0 19.4 -
RoCE (%) 15.4 17.6 19.7 17.1 - 20.4 23.3 -
- - - - - - - - -
- - - - - - - - -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q3FY23 Results: Steady quarterly performance

  • Revenues grew 18.3% YoY to | 2491 crore, mainly driven by high double-digit growth in India, US and Brazil markets. On the operational front, EBITDA increased 35.1% YoY to | 724 crore while EBITDA margins expanded 361 bps to 29.1% YoY. PAT increased 13.73% YoY to | 283 crore. Margins came in at 11.4%. The change in revenue mix, higher revenues across geographies helped such a performance during the quarter
  • Torrent’s numbers were in line with our estimates on the sales front but margins were impacted by a one-off in manufacturing overheads. Branded generics business India continues to perform well with focus on Curatio acquisition and synergising it with Torrent in terms of cost as well procurement. Brazil numbers were a beat on our estimates driven by generic brands and CNS franchise. US continues to witness price erosion in high single digit, growth is due to low base and currency tailwinds. In Germany, supplies for the tender have started but it continues to witness price erosion in high single digit. We remain positive on Torrent’s growth story and expecting some headwinds from acquisition of Curatio Healthcare

 

Q3FY23 Earnings Conference Call highlights:

Performance drivers:

  • Overall, the performance was led by robust growth from branded generic markets while steady performance was delivered by the generic markets
  • New launch momentum, top brand performance and portfolio integration from acquisitions were main drivers of growth in the branded generic markets
  • Improved price realisation acted as a tailwind during the quarter
  • The company is strengthening its share in diabetes segment

India business:

  • The performance of its leading brands, the success of its recent launches, particularly in the chronic market and the rapid expansion of the Curatio portfolio were the main drivers of growth
  • It has started realising synergies in terms of costs due to Curatio business

Brazil business:

  • Its CNS and generic business, which currently accounts for around 14% of Brazilian revenues, have made significant contributions to growth market
  • The share of its top two markets in prescriptions for December came in at 8% for Desvenlafaxine and 9% for Rivaroxaban

Germany business:

  • The commercialisation of some of the new tenders won earlier in the year, as well as four new launches in Q3 drove the performance
  • These new products helped the company compensate for the rising pricing pressures due to increased competition in the market

US business:

  • It received OAI classification for the Indrad facility
  • It plans to file about five to six products in the current fiscal year

Launches:

  • Successfully launched six products in the last 12 months in Brazil markets whereas there were four new launches in Germany in Q3FY23
  • In Brazil, it also intends to increase its coverage of CNS in cardio markets from the current 19% to 35% by FY25
  • Currently, there are 10 products in Brazil, which are pending for approval with ANVISA. It plans to add 10 plus products before the end of this fiscal year

Disclaimer

ANALYST CERTIFICATION

I/We, Siddhant Khandekar, Inter CA, Kushal Shah, CFA L1, CFP, Utkarsh Jain,MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products.

ICICI Securities is Sebi registered stock broker, merchant banker, investment adviser, portfolio manager and Research Analyst. ICICI Securities is registered with Insurance Regulatory Development Authority of India Limited (IRDAI) as a composite corporate agent and with PFRDA as a Point of Presence. ICICI Securities Limited Research Analyst SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. 

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities and its analysts, persons reporting to analysts and their relatives are generally prohibited from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. 

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stocks price movement, outstanding positions, trading volume etc as opposed to focusing on a companys fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports. 

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. 

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, and target price of the Institutional Research. 

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. 

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. 

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. 

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. 

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. 

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report. 

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. 

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. 

RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold, Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts valuation for a stock

Buy: >15%

Hold: -5%to 15%;

Reduce: -15% to -5%;

Sell: <-15% 

Pankaj Pandey

Head – Research

pankaj.pandey@icicisecurities.com

 

 

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

 

 

research@icicidirect.com

Read More