Torrent Pharma trades higher for six straight day; stock hits new high

Torrent Pharma, Pharma
Shares of Torrent Pharmaceuticals was trading higher for the sixth straight day, up 2 per cent at Rs 1,929 apiece, hitting a new high on the expectations of healthy financial results for the quarter ended December 2018 (Q3FY19).

In the past six trading days, Torrent Pharma, manufacturers of branded and generic formulations, has outperformed the market by gaining 6 per cent, as compared to a 1 per cent rise in the S&P BSE Sensex.

Earlier this month, the rating agency India Ratings and Research (Ind-Ra) has withdrawn rating of Torrent Pharma’s short-term debt programme as it has been repaid in full.

For the September quarter (Q2FY19), Torrent had reported in-line results led by the Unichem acquisition and sustainable growth in the US despite a one-time hit of Rs 25 crore due to a product recall. The company reported a net profit of Rs 179 crore in Q2FY19 as against Rs 204 crore in Q2FY18. The lower net profit also due to higher provision for depreciation and amortization on account of acquired business and lower hedging gains due to rupee depreciation.

Torrent’s Q2FY19 revenues grew 33 per cent year-on-year (YoY), led by domestic revenues (including Unichem), which grew around 34 per cent YoY. EBITDA (earnings before interest, tax, depreciation and amortization) margin improved 200 bps to 25 per cent from 23 per cent in year-ago quarter.

The company said as on September 30, 2018, 35 ANDAs are pending approval and 5 tentative approvals have been received for the US market.

Analysts remain positive on Torrent Pharma on the back of faster turnaround of the Unichem portfolio, outperforming domestic formulation in its base portfolio, and ongoing R&D effort toward building a robust ANDA pipeline for the US market.

Motilal Oswal Securities expect Torrent Pharma to post around 36 per cent YoY growth in the Q3FY19 reported sales. EBITDA margin is likely to improve by around 190 bps YoY to 26.2 per cent. The brokerage firm, however, expects profit after tax to decline by around 14 per cent due to an increase in interest expense and higher depreciation.

Analysts at IndiaNivesh expect FY19 to be a remarkable year for Torrent, with a potential improvement in the Unichem portfolio resulting in at least 100bps YoY improvement.

“We believe Torrent’s Q2FY19 sustained margin performance is noteworthy and implies that Unichem margins have already moved up significantly as is evident from the growth of its top five brands. The margin growth was aided by the 50 per cent synergies achieved in field-force rationalization. Our analysis suggests that growth will be driven by branded revenues in India, product launches in the US, moderate growth in Brazil, and superior growth in Europe,” the brokerage firm said in Q2FY19 result update. The stock, however, trading above the target price of Rs 1,870 per share.

At 01:00 PM; Torrent Pharma was trading 1.7 per cent higher at Rs 1,924 on the BSE, as compared to 0.27 per cent rise in the S&P BSE Sensex. A combined 201,809 equity shares changed hands on the counter on the BSE and NSE so far.


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