Buy Torrent Pharmaceuticals; target of Rs 2954: Sharekhan

BUY

Sharekhan's research report on Torrent Pharmaceuticals

Q4FY24 results were good where sales grew by 10% y-o-y (2% below our estimates), EBITDA grew by 21% y-o-y (0.8% above our estimates) and PAT grew by 56% y-o-y (10% above our estimates). Gross margins were healthy at 74.8% (150 bps above our estimates), while EBITDA margin of 32.8% (90 bps above our estimates) led by Curatio synergies and higher sales in branded generic market. The company is not scouting for any M&A deals in any regions and is looking for repayment of Rs 1300-1400 crore debt pa out of higher cash flows.

Outlook

Stock trades at 48x/40x its FY2025E and FY26E EPS and due to its 1) Superior margin profile, 2) double digit growth in branded market and 3) repayment of debt through increased cash flows, hence, we believe the premium valuation to sustain and retain our PT to Rs. 2954 (ascribing a P/E of 44x on FY26E).

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