Torrent Pharma Q1 Results Review- Segment Continues To Drive Growth: Centrum

Centrum Report

Torrent Pharmaceuticals Ltd. Q1 FY25 revenue/Ebitda were in-line while profit after tax was a miss on our estimates. Overall sales were Rs 28.6 billion (+10% YoY) for the quarter. This was led by India/Germany segments delivering 15%/10% YoY growth respectively.

However, Brazil grew a modest 3% YoY and U.S declined 12% YoY (CC: -9% YoY). Adjusting for a one-off expense of Rs 0.2 billion, Ebitda was Rs 9.2 billion (+17% YoY) with margins expanding 180bp YoY to 32.3% (our estimate 31.6%), due to better gross margin (+80bp YoY) and lower opex (down ~100bp YoY as % of sales).

Adjusted profit after tax grew 26% YoY to Rs 4.8 billion (our estimate Rs 5.2 billion) driven by lower finance costs (down 25% YoY) offset by lower other income (down 29% YoY) and higher tax rate of 29.4% (versus 28.8% in Q1 FY24).

Over FY24-26E, we expect India sales to witness 16% compound annual growth rate led by continued outperformance over IPM. Also, we expect Brazil/Germany/US segment to witness 13%/10%/9% compound annual growth rate.

Additionally, we expect Ebitda margins to expand 220 bp to reach 33.6% in FY26. The Effective tax rate in FY25/FY26 is expected to be 30%/26% respectively. Accordingly, we have revised our FY25/FY26 earnings estimates by -4%/8%.

We value Torrent Pharma at 37 times FY26E earning per share to arrive at a target price of Rs 3,350.

However, we see majority of the positives being already factored in the current price. Downgrade to 'Add'.

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