EUR 120.00 For Business Accounts Only

MOSL: TORRENT PHARMA (Neutral)-India/RoW steady; low interest cost supports earnings

Torrent Pharma: India/RoW steady; low interest cost supports earnings

(TRP IN, Mkt Cap USD4.8b, CMP INR2027, TP INR1930, 5% Downside, Neutral)

 

Strong domestic play; US growth hinged on regulatory clearance

• Torrent Pharma (TRP) has exhibited a robust 23% CAGR (FY14-19) in domestic formulation (DF) sales, executing well both organically and inorganically. However, this benefit is getting offset to some extent by the ongoing regulatory issues at its Dahej/Indrad sites for the US generics business.
• We maintain our EPS estimate for FY20/21/22 to factor in better operating leverage in DF and increased market share in US generics. Maintain Neutral given the limited upside from current levels. 

 In-line with our estimates

• Revenues declined marginally by 1% YoY to INR19.7b (our estimate: INR20.6b).
• India business (INR8.7b) grew by a moderate 4.3% (partly due to a high base of past year). Adjusting for one-offs due to the integration of TRP and Unichem’s stockists, India business growth stands at 8.5% YoY.
• Brazil business was up 12.5% YoY at INR1.9b.
• US business was down 22% YoY to INR3.8b (USD54m). Moreover, Germany business declined 18% YoY to INR2.2b.
• Gross margin (GM) expanded 160bp YoY (-80bp QoQ) to 72.4%, while EBITDA margin came in at 27.5% (+100bp YoY/50bp QoQ; our estimate: 26.9%). Better GM due to improved product mix and lower R&D expense was offset to an extent by higher other expenses (+110bp YoY).
• PAT growth of 17% YoY (INR2.5b v/s our estimate: INR2.4b) was higher than EBITDA growth of 2.7% due to lower interest cost/higher other income.