Torrent Pharma a good play on India & US story: CLSA

Moneycontrol BureauBrokerage house CLSA has raised its price target for Torrent Pharma to Rs 1830 from Rs 1800 and maintained its 'buy' call after the company's fourth quarter earnings, saying the stock was a "good play on the India and US story."Torrent Pharma’s fourth quarter results were largely in line with street expectations. A key metric in the company’s fourth quarter results was its India growth, which was back on track after two subdued quarters, says the CLSA report. India sales grew 13 percent year-on-year to Rs 450 crore."We expect Torrent to build on this base quarter in FY17 driven by 10 new launches in the US, fresh capacities for existing products in the US and EU, and above-industry-average growth in India," says the report, adding, "this should drive a 19 percent core earnings Cagr (compounded annual growth rate) over FY16-18 despite a significantly higher spend on R&D."

Another positive piece of news for Torrent was the commissioning of the Dahej plant in April. This plant should support growth in the US and EU markets where the pharma company’s running capacity is constrained, adds the report.

Torrent Pharma reported consolidated net profit of Rs 357 crore for the quarter ended March 31, 2016. It had posted net profit of Rs 130 crore for the January- March period of the previous fiscal.However, a couple of negative surprises revealed the pharma company has more work to do. Torrent has guided for R&D spends to rise to 8 percent of sales in FY17 as against 4 percent in last fiscal year gone by.

In absolute terms, the brokerage sees an increase of 54 percent in R&D spends in FY17 (40 percent YoY increase in FY16).