ICICI Direct is bullish on Torrent Pharmaceuticals has recommended buy rating on the stock with a target price of Rs 1750 in its research report dated July 24, 2019.
ICICI Direct's research report on Torrent Pharmaceuticals
Revenues grew 8.0% YoY to Rs 2022 crore (I-direct estimate: Rs 2055 crore) mainly due to 12.6% YoY growth in the US to Rs 376 crore (I-direct estimate: Rs 353 crore). Indian formulations grew 9.3% YoY to Rs 907 crore (I-direct estimate: Rs 880 crore). EBITDA margins improved 127 bps YoY to 26.8% YoY (I-direct estimate: 25.5%) mainly due to improvement in gross margins (72.4% vs. 70.2% in Q1FY19). EBITDA grew 13.4% YoY to Rs 541 crore (I-direct estimate: Rs 524 crore). Net profit grew 32.5% YoY to Rs 216 crore (I-direct estimate: Rs 206 crore). Delta vis-à-vis EBITDA was due to low base tax rate (22.6% vs. 29.7% in Q1FY19).
Outlook
The company’s portfolio is finely balanced between India, Brazil, Germany and the US with India being the leader. With consistent FCF generation and moderation in core capex, we expect the leverage situation to improve substantially. We arrive at our target price of Rs 1750 (24x of FY21E EPS of Rs 72.9).
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