Hold Torrent Pharma; target Rs 891: Sushil Finance

Sushil Finance's research report on Torrent Pharma (TPL)

"Torrent Pharma (TPL) reported strong growth of 29.2 percent on the revenue front whereas its PAT came in at Rs.1110 mn (including several one-offs) in comparison to a loss in Q4FY12 (on the back of one time charge). For the full year, TPL recorded revenues of Rs.32120 mn registering a growth of 19.1 percent, with PAT growing to Rs.4330 mn, a growth of 52.4 percent."

"Revenues grew by 29.2 percent YoY from Rs.6743 mn in Q4FY12 to Rs.8710 mn in Q4FY13 on the back of 34 percent growth from International operations specially US (44 percent), Europe including Heumann (60 percent) and ROW including CIS (22 percent) markets. The domestic formulation business witnessed marginal growth of 9 percent YoY to Rs.2180 mn led by 15 percent YoY growth in chronic segment and 10 percent growth in acute segment, while contract manufacturing business growth was flat YoY due to lower insulin off-take by Novo-Nordisk. EBITDA margins came in at 25.3 percent v/s 12.6 percent in Q4FY12 led by Rs.290 mn milestone income & Rs.230 mn of forex gain. EBIDTA margins stood at 19.9 percent adjusting for these one-offs. TPL’s Q4FY13 PAT came in at Rs.1110 mn v/s a loss of Rs.16.5 mn in Q4FY12 (on the back of one time charge of Rs. 654 mn). Excluding for a diminution in value of investment worth Rs.370 mn, the adjusted PAT came in at Rs.1480 mn for the quarter."

"OUTLOOK & VALUATION: With the company continuing to face headwinds in the domestic space specially the acute segment coupled with some sluggishness expected in the market in Q1FY14E on the back of implementation of NPPP 2013, we believe the company will take some time before it resorts back to strong double digit growth in the domestic space. However on the export front, we believe, TPL is well on course to register stellar performance backed by strong growth & higher profitability expected from the US business coupled with expected noticeable improvement in performance from other existing markets such as Europe, Brazil etc."

"On the margin front, Q4FY13 recorded considerable improvement on account of higher dossier sales, forex gain & lower R&D expenses. With R&D expenses expected to increase to 5-6 percent of sales, we believe the FY13 EBIDTA margins are not sustainable going forward. However, on the revenue front we have upward revised our FY14 estimates marginally on the back of better visibility and also introduced FY15E numbers. We have thereby rolled forward our target based on FY15 estimates recommending a HOLD on the stock with a TP of Rs.891 (14x FY15E EPS of Rs.63.7)," says Sushil Finance research report.

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