Torrent Pharma - March 2013 Results Preview - Motilal Oswal

- We expect Torrent Pharmaceuticals (TRP) to post 15.4% YoY growth in 4QFY13E top line to INR7.78b, led by strong growth in the US and Europe (excl. Germany). We expect domestic formulations to grow 13% YoY to INR2.28b, while Brazil is expected to continue to show a slowdown this quarter.

- EBITDA is likely to grow 13% YoY to INR962m (impacted mainly by a slowdown in Brazil). EBITDA margin will contract 20bp due to higher other expenses and employee costs.

- Adjusted PAT would be INR669m, up 19% YoY.

Over the last 6 years, TRP delivered 33% EPS CAGR, even as capital employed CAGR was just 17%. It has consistently improved profitability, with RoCE increasing from 14.5% in FY05 to 28.5% in FY12. We believe current valuations do not reflect the improvement in business profitability, the turnaround of international operations and its strong positioning in domestic formulations, particularly in chronic therapeutic segments. We believe that TRP should trade at a premium to most mid-cap pharma companies, and that its valuation gap vis-à-vis frontline pharma companies should reduce. The stock trades at 12.8x FY14E and 10.8x FY15E EPS. Maintain Buy.

Source : Equity Bulls

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