BackTorrent Pharma share price gives up early gains, falls over 2% after Q2 results; should you buy?
Torrent Pharma posted a consolidated net profit of ₹386 crore for the September quarter, up 24% from a year ago, while its revenue rose by 16% to ₹2,660 crore from ₹2,291 crore a year earlier.
PremiumTorrent Pharmaceuticals share price gave up early gains to trade over 2% lower on Wednesday after the company reported a strong rise in its net profit and revenue for the second quarter of FY24. Torrent Pharma declined as much as 2.74% to ₹1,822.80 apiece on the BSE.
The pharma company posted a consolidated net profit of ₹386 crore for the September quarter, up 24% from a year ago, while its revenue rose by 16% to ₹2,660 crore from ₹2,291 crore a year earlier.
Torrent Pharma’s earnings before interest, taxes, depreciation and amortization (EBITDA) was at ₹825 crore, while EBITDA margin was at 32% in Q2FY24.
The company focusing on specialty drugs reported 18% growth in its Indian operations in Q2, with revenues rising to ₹1,444 crore from ₹1,224 crore, YoY.
Read here: Torrent Pharma net profit up 24% to ₹386 cr in Q2
Here’s what brokerages have to say about Torrent Pharmaceuticals Q2 results and share price:
Motilal Oswal Financial Services
According to Motilal Oswal Financial Services, Torrent Pharmaceuticals remains on track for superior execution in the branded generics market (DF & Brazil). It is further scaling up additional levers of growth (trade generics and consumer healthcare) in India. With new launches and increased field force, it is well positioned to sustain growth momentum in Brazil.
“While US generics base business continues to witness price erosion, new approvals would drive growth prospects. Considering these factors, we expect 14%/19%/34% sales/EBITDA/ PAT CAGR over FY23-25 to ₹124 billion / ₹40 billion / ₹22 billion," said the brokerage firm.
It reduced its FY24 earnings estimate by 4% to factor in higher interest cost and moderation in the US generics business. It maintained earnings estimates for FY25.
The brokerage reiterated its ‘Neutral’ rating on the stock due to limited upside from the current levels and has a price target of ₹2,050 per share.
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Kotak Institutional Equities
Torrent Pharmaceuticals delivered a largely in-line performance in Q2FY24, with higher LatAM sales being offset by lower US sales. Despite the recent weakness in the IPM, Torrent Pharmaceuticals’ chronic portfolio continues to do well, Kotak Institutional Equities said.
It expects branded markets to lead EBITDA margin expansion of 250 bps over FY2023-26E for the company.
“Demonstrating its strong turnaround capabilities yet again, Torrent Pharmaceuticals continues to successfully extract synergies from Curatio. Though the stock has come off from its peak, we await a better entry point. Given our expectation of EPS dilution over the medium term if Torrent Pharmaceuticals acquires Cipla, any potential deal remains the primary monitorable," said the brokerage house.
It retained ‘Reduce’ rating on the stock with an unchanged target price of ₹1,950 per share.
Nuvama Institutional Equities
Despite best-in-class metrics, Torrent Pharma still offers growth headroom while earnings are not under threat as domestic growth is ahead of market and OTC push is another tailwind given its portfolio; 20% PCPM increase potential; and Brazil growth at 12-13%.
“We welcome management’s initiatives to continuously optimise the cost structure as evident in foregoing the low-margin US business. Price erosion in the US seems to be stabilising and with tender wins in the EU, these businesses are unlikely to be a drag on TRP. We are reducing FY25/26E EPS by ~5% due to slower-than-expected US recovery and model in a slightly conservative 12% domestic growth," said Nuvama Institutional Equities.
The brokerage retained ‘Buy’ call on the stock with an unchanged target price of ₹2,410 per share.
Antique Stock Broking
The continued improvement in gross margin showcases the strengths of the business model to leverage its brand and product mix, said Antique Stock Broking. It continues to remain constructive on Torrent Pharma’s domestic business and the Brazil franchise, with both geographies expected to grow higher than market growth rates.
“Given the (i) OTC foray, (ii) Higher growth in its key geographies of India and Brazil, and (iii) Recovery in the German formulations business, we expect the EBITDA margin to improve to ~33% by FY26. With the strong underlying cash flow from its India business, Torrent Pharma was able to repay debt of ₹9 billion and is expected to halve its debt by FY25," it said.
It maintained a ‘Buy’ rating on the stock and raised the target price to ₹2,265 per share from ₹2,200 earlier.
At 9:50 am, Torrent Pharmaceuticals share price was trading 0.49% higher at ₹1,883.30 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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