Torrent Pharma's well rounded Q1 performance wins over brokerages

Torrent Pharma shares delivered over 31 percent returns in 2024 so far.

Pharmaceutical company, Torrent Pharma's strong performance across all key parameters in the April-June quarter has garnered praise from brokerages. Most analysts on the Street also paint a promising growth picture due to its solid domestic performance, robust margin profile, and expanding presence in the US market.

The company delivered a 20 percent on-year spike in net profit for Q1 of FY25 at Rs 457 crore while revenue rose over 10 percent to Rs 2,859 crore. The moderate topline growth also factors in adverse impact from one-off costs, excluding which the rise in revenue would be even stronger, brokerage firm Jefferies noted.

Torrent Pharma's performance in the domestic market remained strong, however, sales in Brazil delivered subdued growth due to the impact of floods in the country and adverse currency depreciation.

Nonetheless, the drugmaker is attempting to diversify its markets by strengthening its presence across Germany and the US, a move seen in a positive light by brokerages.

The company has increased its tender win rate in Germany thanks to cost reduction programs that have enhanced its competitiveness. In the US, the company anticipates that new product approvals to accelerate, boosting its sales growth.

Jefferies also remains confident over the drugmaker, expecting Torrent to continue its strong run and international regions' growth to pick up pace from coming quarters.

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Nuvama Institutional Equities too shares a similar view, anticipating the company to continue to experience double-digit revenue growth led by domestic chronic business, post-flood recovery in the Brazil business and tender wins in the German market.

Meanwhile, Jefferies also applauded Torrent Pharma's strong margin profile. The company's  EBITDA margin expanded to 31.6 percent in the quarter gone by, up from 30.5 percent recorded in the year ago period. On the other hand, gross margin surged to a multi-year high of 75.7 percent in the quarter, which was driven by strong growth in the India market, Jefferies stated.

"Torrent seems to be on the cusp of firing on all cylinders with strong India
growth and international regions also joining the growth momentum,"  Jefferies said. "High sales growth coupled with stable to soft raw material prices will continue to provide margin tailwinds for the company," it added.

Along with that, the firm also retained its 'buy' call on the stock with a price target of Rs 3,540. Much like Jefferies, Nuvama also reiterated its 'buy' call on Torrent Pharma, but raised its price target for the stock by over 20 percent to Rs 3,606.

Motilal Oswal Financial Services also sees Torrent Pharma as a promising play in the pharma space, as it derives 64 percent of its revenue from branded generics and delivers sustainable outperformance over the industry in domestic as well as Brazil markets.

Meanwhile, the brokerage expects Torrent's drug approvals in the US to pick up, which would not only boost revenue growth but also improve the profitability of the US generics segment. Despite anticipating strong growth for Torrent, MOFSL still chose to retain its 'neutral' stance on the stock, citing limited upside from current levels. It has a price target of Rs 3,340 for the stock.

At 09.20 am, shares of Torrent Pharma were trading  3.4 percent lower at Rs 3,032.80 on the NSE.

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