Torrent Pharma - Well-Poised To Improve Earnings Outlook: Motilal Oswal

Motilal Oswal Report

We recently met the management of Torrent Pharmaceuticals Ltd. to understand the outlook of core segments in further details.

We were enthused with Torrent Pharma’s efforts to not only scale-up, but also improve profitability of the Curatio portfolio. Apart from enhancing its presence in derma therapy, it has firmed up levers to drive better-than-industry growth in prescription-led portfolio.

Following the initial success in the over-the-counter program for the India market, Torrent Pharma intends to scale up activities through new launches and marketing efforts.

Torrent Pharma has also strengthened its MR force and product launches to outpace the Brazilian market and drive better margins as well. 

Following the clearance of the Dahej site by U.S. Food and Drug Administration on the regulatory front, a gradual uptick in the U.S. generics business is anticipated.

Compared to 10%/15%/10% sales/Ebitda/profit after tax compound annual growth rate over FY18-23, Torrent Pharma is expected to deliver 14%/18%/29% sales/Ebitda/profit after tax CAGR over FY23-26, led by 16% sales CAGR in branded generics (domestic formulation/Brazil), 11% sales CAGR in U.S. generics, and 300 basis points margin expansion.

We value Torrent Pharma at 28 times 12 months forward earning to arrive at a price target of Rs 2,160.

We maintain a Neutral stance on limited upside from the current levels.

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