Torrent Pharmaceuticals reported a mixed set of numbers for the September quarter. Nevertheless, most brokerage firms have retained faith in the stock and maintained their views on it.
The company on October 21 reported a consolidated net profit of ₹312 crore for the September quarter of the current financial year (Q2FY23) which was down by a percent year-on-year (YoY). For Q2FY22, the company reported a profit of ₹316 crore.
Net revenue for Q2FY23 stood at ₹2,291 crore, up 7.21% YoY, against ₹2,137 crore.
Shares of Torrent Pharmaceuticals are down more than 3% this year till October 25 against a 2% gain in the benchmark Sensex.
Brokerage firm ICICI Securities maintained a 'buy' call on the stock with a target price of ₹1,853.
"We remain positive on Torrent considering its strong branded franchise supported by a dominant chronic segment in India and Brazil. The recent acquisition of Curatio should be synergistic to the domestic business despite it being EPS dilutive in the near term," said ICICI Securities.
ICICI Securities has marginally raised its revenue estimates to factor in the quarterly gyrations but cut our EBITDA estimates by nearly 1-2% for FY23-FY24E to factor in higher SG&A spending.
"We maintain a 'buy' with a revised target price of ₹1,853 based on 19 times Sep’24E EV/EBITDA (earlier: ₹1,769, based on 19 times FY24E EV/EBITDA)," said ICICI Securities.
The slowdown in domestic growth and forex volatility are the key risks against the stock said the brokerage firm.
Prabhudas Lilladher, too, has a 'buy' call on the stock with a target price of ₹1,850 as the brokerage firm highlighted that Torrent Pharma has ₹70bn (75% of total sales; including Curatio) worth of highly profitable branded formulation sales spread across India, Brazil and RoW markets.
"In the near term, the Curatio acquisition will increase Torrent’s net debt and we see this acquisition as EPS dilutive. Historically, Torrent has managed to integrate successfully Unichem and Elder acquisition which gives us comfort. We expect 18% EBITDA and 19% EPS CAGR over FY22-25E," said Prabhudas Lilladher.
Another brokerage firm Anand Rathi Share and Stock Brokers also has a 'buy' call on Torrent Pharmaceuticals stock with a target price of ₹1,915.
"Strong growth in domestic chronic therapies and launches in India, Brazil and the RoW would drive 21% earnings growth in FY22-25. We retain a 'buy', with a higher target price of ₹1,915. Pricing risk in its domestic portfolio, currency fluctuations, and regulatory issues at plants are the key risks," said Anand Rathi.
Brokerage firm JM Financial has a 'hold' call on the stock with a target price of ₹1,560. The brokerage firm said Torrent Pharma reported broadly in-line revenues with Brazil's outperformance overshadowed by Germany's underperformance.
"While margins met our expectations, reported PAT was 12% below expectations on account of lower other income and higher finance costs. The company completed the acquisition of Curatio, a high-growth derma focussed company, in Oct’22 which will be EPS dilutive over the near term," JM Financial said.
The brokerage firm highlighted that Torrent Pharma's management expects sustainable double-digit growth in the domestic and Brazilian markets but guides for mid-to-high single-digit growth in the German market.
"Key drivers include Torrent Pharma’s healthy US launch pipeline (27 awaiting site clearances), expanding domestic field force, high domestic growth and sufficient headroom to pursue domestic inorganic opportunities. However, given the uncertainty around Germany tender wins, contingent new US launches and Curatio’s dilutive transaction over the near term, we maintain our stand," said JM Financial.
According to a MintGenie poll, an average of 30 analysts have a ‘buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.
