Torrent Pharmaceuticals share price surged 8 per cent in early deals on BSE on Wednesday (May 31) to hit their fresh 52-week high of ₹1,851.15, a day after the company reported its March quarter scorecard which showed decent growth in the company’s top and bottom line on a year-on-year (YoY) basis. The stock opened at ₹1,754.90 against the previous close of ₹1,714.80 and rose quickly to the level of its one-year peak.

Torrent Pharma’s March quarter numbers appear to have made the market happy. As Mint reported, during Q4FY23, the company recorded a consolidated net revenue of ₹2,491 crore, up by 17 per cent YoY from ₹2,131 crore in Q4FY22. Net profit stood at ₹287 crore during Q4FY23 as against a net loss of ₹118 crore in Q4FY22.

EBITDA stood at ₹727 crore during the March quarter, up by 30 per cent YoY from ₹561 crore during the corresponding quarter of the previous fiscal.

Brokerage firms have diverse views on the prospects of the stock. While some of them see a significant upside in the stock some believe the current valuation of the stock has limited upside.

Those who are upbeat

Brokerage firm Nirmal Bang maintained a buy call on the stock with a target price of ₹1,981, valuing the stock at 18 times FY25E EV/EBITDA.

“Torrent reported strong revenue growth in Q4FY23, beating our estimates, largely led by continued strong growth in branded generics markets and integration of the recently acquired Curatio portfolio while adjusted margin was in line with our expectation,” said Nirmal Bang.

“We are positive about Torrent Pharma mainly due to its strong chronic-centric branded portfolio, industry-leading PCPM (per capita per month) in India and healthy margins and FCF (free cash flow), which continue to provide opportunities for further inorganic growth,” said the brokerage firm.

Brokerage firm Nuvama Wealth Management also maintained a buy call on the stock with a target price of ₹1,980. The brokerage firm believes the stock is inexpensive at 26 times FY25E P/E (price to earnings ratio) and there is further headroom given that 80 per cent growth will be driven by branded business.

“We are increasingly positive on Torrent Pharma’s branded-franchise-led growth potential given: (i) increasing new launches contribution, price hikes, Rx (prescription medicines) focus will drive low-teens growth in India, (ii) nearly 20 per cent PCPM increase potential, and (iii) 12-13 per cent Brazil growth driven by six launches following seven in FY23,” said Nuvama.

“We keep our FY24E/FY25E EPS (earnings per share) unchanged, but increase multiple to 30 times (from 27 times) given a double-digit growth margin expansion potential,” said the brokerage firm.

Brokerage firm ICICI Direct is also positive about the stock as it upgraded the stock to a ‘buy’ from a ‘hold’ expecting strong traction from branded generics and further scope for margin expansion. The brokerage firm has a target price of ₹3641.9 for the stock.

Those who are cautious

Brokerage firm Motilal Oswal Financial Services has a ‘neutral view on the stock with a target price of ₹1,650, implying a nearly 4 per cent downside.

“We reduce our FY24 and FY25 EPS estimates by four per cent and one per cent, respectively, to factor in (1) incremental expenses for the consumer healthcare platform, (2) a gradual revival in US sales, and (3) improved growth momentum in the Latin America business,” said Motilal Oswal.

The brokerage firm highlighted that Torrent Pharma focuses on the branded generics business in its key markets of India and Brazil. The strategy of building a consumer healthcare segment in India would further enhance the volume growth potential for certain established brands of the company.

“While a successful resolution of compliance issues remains vital for growth in US generics, it has outsourced certain products, which would aid growth in US generics to some extent. Having said this, the current valuation adequately captures the upside in earnings,” said Motilal Oswal.

Brokerage firm Kotak Institutional Equities also maintained a ‘reduce’ call on the stock with a target price of ₹1,645, citing the stock is trading at an elevated nearly 38 times FY2024E EPS.

The brokerage firm said even as it expects India and Brazil to continue their strong growth trajectory, an uncertain US outlook amid a mediocre US pipeline and variability on traction from new tenders in Germany remain concerns.

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