Elara Capital has an accumulate call on Torrent Pharmaceuticals with a target price of Rs 1,840.
Shares of Torrent Pharmaceuticals traded at Rs 1,572.3 around 1:05 pm on 21 May, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.
March quarter highlights:
- Torrent Pharmaceuticals reported Ebitda of Rs 470 crore, up 30.3 per cent YoY, below our estimates of Rs 540 crore on account of lower revenue across geogaphies. Revenue grew by 7.8 per cent YoY at Rs 1,860 crore, against the brokerage's estimate of Rs 2,010 crore.
- Domestic sales grew 8.8 per cent YoY to Rs 750 crore. US sales decline 10.6 per cent QoQ to $53 million.
- As per the brokerage, the QoQ decline in US sales is on account of stoppage of Losartan sales and plant shutdown in Bio-Pharm. Torrent cited that full impact will be visible from Q1FY20 indicating further decline in QoQ US sales.
- Torrent has completely shut down the Leviton facility (erstwhile Bio Pharm) to upgrade the process as it plans to change the production from OTC segment to prescription segment. This will result in decline in sales by $11 million on annual basis and likely to take few months to re-start, the brokerage said.
Investment rationale:
"We have cut our FY20E and FY21E EBIDTA by 14 per cent and 9 per cent, respectively, to factor in weak Q4," the brokerage said.
Despite weak Q4, the brokerage continue to remain positive, given that Torrent generates about 63 per cent of revenue from branded generics which should grow at healthy pace in medium term.
"Recovery in the US sales will be gradual and hinges on faster resolution of Indrad and Dahej facility. We retain accumulate with a revised target price of Rs 1,840 from Rs 2,145 on 13 times Ebitda," the brokerage added.