Torrent Pharma - Focus On Branded Generics, Profitability: HDFC Securities

HDFC Securities Institutional Equities

In its FY24 annual report, Torrent Pharmaceutical Ltd. has highlighted strategic themes that align with its short, medium and long-term goals:

1. improving market share in core markets (India, Brazil, Germany, and the U.S.);

2. investing in growth engines (capabilities in emerging markets);

3. operational excellence (cost competitiveness);

4. engaged and empowered stakeholders (productivity, innovation);

5. deploying digital technologies (data analytics, emerging technologies); and

6. taking responsible actions (carbon emissions and water management).

Torrent Pharma will continue to focus on branded generic business growth (~74% of sales), new launches, improvement of field force productivity, scaleup of consumer healthcare business, cost competitiveness in generics (U.S. and Germany), and deleveraging the balance sheet, backed by strong cash generation (net debt/ Ebitda improved to ~0.9 times in FY24, from ~1.6 times in FY23 and ~2.3 times in FY20).

We tweak our FY25/26E earnings per share and introduce FY27E EPS. We roll forward target price of Rs 3,010, based on a 38 times Q1 FY27E EPS (versus Rs 2,940 at 38 times FY26E), implying 22 times Q1 FY27E enterprise value/Ebitda. Maintain Add.

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