Maintain 'buy' on Torrent Pharma - TP lowered to Rs.733 - Geojit BNP Paribas Financial Services

- Buy rating on Torrent Pharma is maintained with a lower target price of Rs.733, as against the earlier target price of Rs.783.

- EPS projections for FY13 & 14 have been cut by 4% and 6% respectively and hence the cut in target price.

- The company derives 60% of its sales in India from fast growing therapy areas like CVS, CNS and diabetes. Despite the superior product mix, growth of the company has underperformed the industry.

- Inability to scale up mid -sized brands, lack of depth in the CNS product portfolio and low marketing rep productivity could be the reasons for underperformance.

- The company has taken steps to correct the sustained underperformance by imparting greater focus to its field force and appointing a new leader to head the India business. These changes and a good strike rate in new product launches are expected to drive FY12-14 sales at 13.5% CAGR, which is in line with the industry rates.

- Strong USD versus the rupee may result in higher sales with lower gross margins and higher SG& A (sales, general & administrative) costs and EPS forecasts for FY13/14 have been lowered by 4% and 6% respectively. This is resulted in trimming target price to Rs.733 from Rs.783 earlier.

- Adverse impact from the national drug pricing policy and delays in US approvals are key risks to the target price.

Source : Equity Bulls

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