Dolat Capital Market recommended reduce rating on Torrent Pharma with a target price of Rs 2863 in its research report dated October 26, 2020.
Dolat Capital Market's research report on Torrent Pharma
In 2QFY21, Torrent reported muted performance in its key export markets – US (20% YoY decline), Brazil (17% YoY decline, primarily due to currency depreciation) while India (7% YoY growth) aided in flattish revenues for the quarter, in-line with our estimates. However, EBITDA margin at 31.5% were marginally better than expectation led by controlled fixed costs. With field activities resuming normalcy (~75- 80% in both Indian and Brazilian market), we expect cost structure to normalize in next 2 quarters.
At CMP, stock trades at 32x FY22 and 27x FY23 EPS of Rs84.4 and Rs99.6 respectively. Given the higher contribution from branded markets (~60% of revenue), higher exposure to chronic therapies in domestic business and healthy FCF (~Rs8bn in FY20-23E), we value Torrent at ~20% premium to other large cap pharma stocks. Our target price of Rs2,863 is 28x FY23 EPS of Rs99.6 Maintain Reduce.
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