Dolat Capital is bearish on Torrent Pharma has recommended sell rating on the stock with a target price of Rs 2170 in its research report dated May 26, 2020.
Dolat Capital's research report on Torrent Pharma
Torrent reported better than expected operational performance led by lower R&D spend and capitalization of employee expense at Bio-Pharma facility in 4Q while the deferred tax aided PAT growth at 3x YoY (on a lower base). While India continue to lead growth (pre-buying in March aided growth, in-line), exports were a drag. Gross margin at 72.4% was a function of strong growth in India, leading to impressive EBITDA margin of 28.2% (our estimate: 25.4%). Though company remains confident of outperforming IPM growth, we remain wary of the exports (US – 2 key facilities under WL and OAI, Brazil – adverse currency and batch traceability regulations in Germany) given the weaker outlook.
Outlook
Further, per the management, growth sustenance without any newer approvals would be challenging in the US. We believe growth levers from India business has been captured largely and margins have peaked for Torrent. Focus will now shift to growth and balance sheet de-leveraging amidst challenging environment. Recommend SELL.
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