Torrent Pharmaceuticals - Good show despite certain one-offs... - ICICIdirect

Torrent Pharma reported a healthy set of numbers for Q1FY14. Revenues grew 26.7% to Rs. 972 crore, far higher than our estimates of Rs. 887.5 crore on account of 1) 49% growth in European sales and 2) one-time licensing income of Rs. 42 crore from Forest Laboratories pertaining to settlement and licensing agreement for a patent. Gross profit margins, however, declined 260 bps to 68.7% on the back of price erosion in a couple of products in the Brazilian market and inventory write-off of Rs. 22 crore. EBITDA margins improved 110 bps to 21.4%. However, adjusting for one offs such as licensing income, inventory write off and forex loss, EBITDA margins stood at 20.2% (our estimate: 21%). Lower tax provision (20.3% of PBT in Q1FY14 vs. 26.6% in Q1FY13) led to net profit growth of 46.3% to Rs. 149 crore. We are maintaining BUY rating on the stock.

Plans to launch 4-5 drugs including exclusivity drug Duloxetine in US

Revenues from the US market continued to grow strongly with healthy growth of 43% (constant currency growth 38%) on the back of favourable currency and volume growth in existing products. Torrent is planning to launch four or five products in the current fiscal, which include one shared exclusivity FTF product Duloxetine (generic version of Cymbalta, CNS). Beside Torrent, we expect five or six players to launch the product on the same day.

Plans to enter generic-generic business in Brazil market

Sales from the Brazilian market declined 2% YoY due to price erosion in a couple of brands. The company expects five product approvals in the current fiscal and plans to launch the same. It is also planning to enter the generic-generic business segment. The company has received approval for 13 products while around 24 products are under approval.

Growth well-rounded barring Brazil; maintain BUY

We expect revenues, EBITDA and net profit to grow at a CAGR of 16%, 12% and 14%, respectively, in FY13-15E. The recovery in the domestic formulation business was the main takeaway from numbers despite a slowdown in the industry as the company is concentrating on improving productivity of MRs rather than MR count. On the export front, however, Brazil remains the critical geography despite traction from other markets. We have valued the stock at Rs. 466 i.e. 14xFY15E EPS of Rs. 33.3.

Source : Equity Bulls

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