Buy Torrent Pharma Ltd For Target Rs. 3,200 - Yes Securities
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Our view
Torrent seems to have dodged any further erosion in US business particularly when other peers like ALPM and DRRD have been impacted; indeed, US sales have been trending in line with expectation at around US$35‐38mn for last 2 quarters. With US decline exiting the base comparison from Q3, reckon the double digit growth across other key markets – India, Brazil and Germany would be visible. Entry in to trade generics should not dilute margin over next 2 years at least as business would remain sub scale and unlikely to cannibalize chronic portfolio. Other expenses are unlikely to revert to prior run rate going by guidance of ~Rs19‐20bn annualized for FY22. This results in better margin prognosis for current year than envisaged – we note the contrast with other players like DRRD who have stepped up marketing investments in India though the product overlap with TRP is not material. Increased margin assumption drives higher estimate and our BUY stays with TP raised to Rs3,200.
Result Highlights
* US business stabilized at US$36mn for second successive quarter; Sartans, Levittown facility to start contribution
* Double digit growth likely from most major markets ex‐US; gross margin decline appears temporary while savings in other expenses to push EBIDTA margin higher than envisaged earlier
* Enters into trade generics business with subscale operations in the first 2 years driven by few reps and contract manufacturing.
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