Shares of pharmaceutical major Torrent Pharma rose over a percent on October 25 after the company posted a robust performance for the July-September quarter which prompted strong growth expectations from a slew of brokerages.
Firms like Motilal Oswal Financial Services, Nuvama Institutional Equities, HSBC and Goldman Sachs have baked in expectations of a strong growth trajectory, especially for Torrent's core branded generics business in the domestic and Brazil markets.
Torrent Pharma's net profit for the September quarter jumped nearly 24 percent on-year to Rs 386 crore on the back of a 16.1 percent rise in the topline to Rs 2,660 crore. While the bottomline came in above CNBC-TV18's estimate of Rs 377.9 crore, the topline was largely in-line with the expectations.
The quarterly earnings show for the drugmaker was an all-round performance as even the EBITDA margin expanded to 31 percent in the July-September quarter as against 29.4 percent in the year-ago period.
Brokerage firm Goldman Sachs, which has a 'buy' call on Torrent with a price target of Rs 2,325, highlighted that the EBITDA margin was above its estimates. Buoyed by that, the firm now forecasts an over 20 percent EBITDA CAGR (Compounded Annual Growth Rate) for the overall business of Torrent Pharma over FY23-26.
Meanwhile, the highlight of Torrent Pharma's Q2 earnings was its outperformance in the domestic formulations as well as the Brazil market which offset the subdued show in its US business. The drugmaker delivered 13 percent on year constant currency growth in the Brazil market as compared to the 8 percent industry growth. On the other hand, its domestic business topped the mid-single digit growth in the Indian Pharma Market as it grew 18 percent during the quarter.
Goldman Sachs also attributed the strong growth in the drugmaker's core markets for its beat on profitability, keeping its long-term positive outlook intact. Nuvama is also enthused by Torrent Pharma's consistent branded performance. "Even as domestic market faces headwinds, all of Torrent's top brands continue to outperform," the firm stated in a note.
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Moreover, with the addition of 1,200 more sales representatives in the domestic market and expectations of over 10 percent growth in the Brazil market in the long run, Nuvama believes Torrent is well placed to sustain its market-beating growth. The brokerage firm has a 'buy' call on the stock with a price target of Rs 2,410.
HSBC also reiterated its positive stance on Torrent Pharma by maintaining its 'buy' rating on the stock with a target price of Rs 2,200. The firm remains positive on the drugmaker's structurally strong business profile.
MOFSL had similar views as the firm feels Torrent Pharma is on track for a superior execution in the branded generics market in India and Brazil. "With new launches and increased field force, it is well positioned to sustain growth momentum in Brazil. While US generics base business continues to witness price erosion, new approvals would drive growth prospects," the MOFSL stated in its report.
Considering these factors, the firm predicts 14 percent, 19 percent, and 34 percent sales, EBITDA, and PAT CAGR respectively, for the drugmaker over FY23-25. However, the brokerage still chose to retain its 'neutral' recommendation on the stock with a price target of Rs 2,050, citing limited upside potential from the current levels.
Also Read : Torrent Pharma Q2 net profit jumps 24%
Shares of Torrent Pharma have surged over 21 percent in the year so far. At 10.07 am, shares of Torrent Pharma were trading 1.2 percent higher at Rs 1,900.30 on the NSE.
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