Hold Torrent Pharmaceuticals; target of Rs 2475: ICICI Direct
ICICI Direct recommended hold rating on Torrent Pharmaceuticals with a target price of Rs 2475 in its research report dated May 27, 2020.
May 28, 2020 / 11:15 AM IST
ICICI Direct's research report on Torrent Pharmaceuticals
Q4FY20 revenues grew 4.8% YoY to Rs 1946 crore (I-direct estimate: Rs 1924 crore) mainly due to 11.4% YoY growth in India business to Rs 840 crore. US formulations grew 3.5% YoY to Rs 385 crore. EBITDA margins expanded 268 bps YoY to 28.2% (I-direct estimate: 25.5%) due to higher domestic sales, cost rationalisation and increased productivity. EBITDA grew 15.9% YoY to Rs 548 crore (I-direct estimate: Rs 490.6 crore). Net profit grew 49.7% YoY to Rs 314 crore (I-direct estimate: Rs 209.4 crore) in line with its operational performance. Delta vis-à-vis EBITDA was mainly due to negative tax outgo due to one-time adjustment amid change in laws.Outlook
One–offs and subdued US due to regulatory hurdles impacted revenues. Overhang pertaining to two US focused plants notwithstanding, Torrent continues to impress thanks to its robust margin profile, which can be attributed to global portfolio that comprises ~60% branded generics. We expect a further improvement in this matrix and product rationalisation to further strengthen margins. The company’s portfolio is finely balanced between India, Brazil, Germany and the US with Indian being the leader. With consistent FCF generation and moderation in core capex, we expect the leverage situation to improve substantially. However, the recent run up in the stock price has left limited scope for further upside. We maintain our target price of Rs 2475 (28x of FY22E EPS of Rs 88.3).
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