Torrent Pharma gains 5% after strong Q4 results; Brokerages maintain hold rating

Shares of Torrent Pharmaceuticals Ltd jumped nearly 5 percent in morning trade on May 31, after the company posted robust Q4 results. At 10:52 am, the company’s shares were trading 4.85 percent higher at Rs 1,796.65 on the NSE.

The financials

Torrent Pharmaceuticals Limited, the flagship company of the Torrent Group, posted a net profit of Rs 287 crore for the fourth quarter of the fiscal year, compared to a loss of Rs 118 crore in the corresponding quarter of the previous year. Its revenue from operations came in at Rs 2,491 crore, showing a 16.9 percent year-on-year (YoY) increase, as opposed to Rs 2,131 crore in the fourth quarter of FY22.

At the operating level, EBITDA stood at Rs 727 crore, marking a 30 percent YoY increase from Rs 561 crore in Q4FY22. The total income for the quarter was Rs 2,500 crore, while total expenses during the period amounted to Rs 2,067 crore.

On an annual basis, the net sales of the company grew by 13 percent to Rs 9,620 crore for FY23, compared to Rs 8,508 crore in the previous year. Net profit after tax increased by 60 percent YoY to Rs 1,245 crore in FY23, as against Rs 777 crore in the previous year.

India, Brazil markets on the up

Torrent Pharma reported strong revenue growth in various geographic markets. In India, their business recorded a revenue of Rs 1,257 crore, showing a 22 percent growth driven by successful new launches in chronic therapies and the integration of the Curatio brand. Additionally, Torrent Pharma launched a consumer healthcare platform during the quarter and dedicated a trade field force to enhance distribution.

Motilal Oswal brokerage firm believes that the company’s strategy of building a consumer healthcare segment in India will further enhance volume growth potential for certain established brands.

The Brazil business reported a revenue of Rs 318 crore, a 27 percent YoY rise driven by a robust underlying market, successful new launches, and growth in the generic segment. Torrent Pharma also strengthened its pipeline with 14 filings and 12 approvals during the year.

However, their US business revenue decreased by 1 percent to Rs 280 crore due to price erosion on the base portfolio and a lack of new launches pending facility inspections.

In Germany, Torrent Pharma’s revenue reached Rs 253 crore, up by 16 percent YoY, primarily attributed to new tender wins and an increase in the over-the-counter (OTC) segment.

What analysts have to say

Most brokerages have given a neutral/hold rating on the stock.

Jefferies maintains a “Hold” rating on Torrent Pharma stock with a target price of Rs 1,650 per share and has marginally adjusted their FY24/25 earnings per share (EPS) estimates. Jefferies stated, “Torrent Pharma’s 4QFY23 revenue/EBITDA were largely in line with our estimates. Brazil revenue grew by 27 percent YoY, followed by India at 22 percent. The branded market and recovery in Germany remain key revenue growth drivers, along with a steady EBITDA margin expansion of 60-100 basis points per annum.”

Motilal Oswal brokerage firm also maintains a “Neutral” rating with a target price of Rs 1,650, based on 12 times forward earnings. They have adjusted their FY24/FY25 EPS estimates by 4 percent and 1 percent, respectively, to account for incremental expenses for the consumer healthcare platform, gradual revival in US sales, and improved growth momentum in the LATAM (emerging markets of Latin America) business.

Meanwhile, Nomura is bullish on the stock with a “Buy” call at a target price of Rs 1,838. They see price hikes and operating leverage as key margin levers, with the potential for a 60-100 basis points improvement in the margin for Torrent Pharma.

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