Markets
Curatio synergies, product launches key for Torrent Pharma
Summary
However, the company’s March quarter (Q4FY23) results are broadly in line with Street estimates. Analysts say stable margin last quarter, expected gains from Curatio integration and new product launches are reasons for optimism.
Torrent Pharmaceuticals Ltd’s shares hit a new 52-week high on Wednesday. However, the company’s March quarter (Q4FY23) results are broadly in line with Street estimates. Analysts say stable margin last quarter, expected gains from Curatio integration and new product launches are reasons for optimism. Torrent acquired Curatio Healthcare in September.
In Q4, Curatio was a key factor aiding Torrent’s mainstay India market growth. India revenues increased 22% year-on-year led by strong performance of new launches in chronic therapies and Curatio portfolio consolidation. Excluding Curatio, India revenues grew 15%. Torrent launched a consumer healthcare (CHC) platform in India last quarter and here, it has done a pilot study in four states for its Shelcal brand. Management plans to take it pan-India and expects to incl-ude five more products in FY24.
Torrent’s Brazil market performed well, too, though it accounts for a smaller portion of consolidated revenues. The US market’s performance was weak. Torrent’s consolidated revenues rose 17% year-on-year to ₹2,491 crore driven by gro-wth across branded generics.
Price hikes taken in FY23 and a favourable product mix meant that Q4 Ebitda margin at 29.1% expanded by 286 basis points year-on-year, but was flattish sequentially. For Torrent’s investors, margin trajectory would be a factor to closely track ahead. “The company has announced CHC business launch with Shelcal brand and expects to invest in additional therapies which will add additional costs over the near-term," said JM Financial Institutional Securities analysts. That said, management said price hike benefits would come in Q1FY24.
Further, how synergy benefits from Curatio play out is another factor to watch out for. ICICI Securities says, “Torrent is expected to take another 3-4 quarters to realise synergies from Curatio portfolio. However, in near term, higher interest cost and depreciation would likely dent profitability."
Going ahead, new product launches in existing branded generics segment will be a key growth driver. For US market, regulatory clearance for Dahej and Indrad facilities are key.
To be sure, Torrent’s shares seem to be factoring in the brighter picture. While the stock is down 5.8% from its recent highs, in 2023 so far, the stock has rallied by 14%. “Stock has further rerating potential, but it depends on sustained improvement in operating margin, Curatio acquisition integration/productivity improvement and progress on scale up of new CHC segment," Param Desai, analyst, Prabhudas Lilladher, said.
