MOSL: TORRENT PHARMACEUTICALS (Buy): Pain points evident across geographies-success in course correction key
MOSL: TORRENT PHARMACEUTICALS (Buy): Pain points evident across geographies-success in course correction key
(TRP IN, Mkt Cap USD3.9b, CMP INR1601, TP INR1500, 6% Downside, Neutral)
- Sales growth subdued: Sales increased 8% YoY to INR18.5b (our estimate: INR21.1b) in 4QFY19, supported by the US (+21% YoY to INR3.7b; +11% YoY to USD52m in USD terms) and India (DF; +9% YoY to INR7.5b) businesses. However, Germany (+2% YoY to INR2.3b) and Brazil (-4% YoY to INR2b) businesses exhibited a muted performance.
- Profitability supported by a favorable base: Gross margin (GM) shrank 170bp YoY (+50bp QoQ) to 70.7% due to a change in the product mix. However, EBITDA margin expanded 440bp YoY to 25.5% (our estimate: 26.9%), led by lower other expenses (-680bp YoY off a high base). EBITDA of INR4.7b (up 14% YoY) came in below our estimate of INR5.7b. In 4QFY19, TRP incurred an extraordinary expense of INR3.6b toward (a) an impairment related to Bio-Pharm (INR2.2b) and (b) a penalty on product recall in the US (INR1.4b). Adjusted for this, PAT stood at INR1.6b (our estimate: PAT of INR2.7b) up 12.5% YoY.
- For FY19, sales/EBITDA stood at INR76b (+27% YoY)/INR19.5b (+44% YoY), while PAT came in at INR7.2b (down 7% YoY)
Torrent Pharmaceuticals is a pharmaceutical company based in India. Co. is engaged in the manufacture, sale and export of pharmaceuticals in the form of tablets, capsules, liquid, injections, vials, ointments, and bulk drugs. Co. is predominately active in the therapeutic areas of cardiovascular (CV) and central nervous system (CNS) and maintains a significant presence in gastro-intestinal, diabetology, anti-infective and pain management segments. Co.'s primary products include Insulin, Domperidone HCI, and Alprazolam. In addition, Co. is also engaged in the manufacture of medical equipment such as computerized tread mills and medical electronic equipment.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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