Reduce Torrent Pharmaceuticals Ltd For Target Rs 1,853 - Yes Securities
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Steady show; margin gain priced in!
Result Synopsis
Torrent revenues beat expectation as India business up 17% YoY and excluding Curatio domestic business grew 13%. Traction was seen across Brazil (aided by forex tailwind YoY) while Germany rebounded QoQ. Gross margin had a 60bps one-off due to plant shutdown post FDA audit which otherwise would have translated in to margin around 30%.
Domestic business would get a boost from full year of Curatio revenues which would add ~2.5% to growth next fiscal boosting India growth to 12%. Germany remains a low growth market with visibility of ~5-6% growth based on current tender wins though scope exists for slightly higher growth. Brazil has benefited from INR depreciation against Real in FY23 and we continue to expect ~10% constant currency growth in FY24. We raise domestic estimates incorporating Curatio and slightly better core business growth (overall 12% from 11%) and better traction in other export markets based on Q3 performance. Margin levers in the form cost synergy from Curatio acquisition, lower freight expenses exist, and we expect OPM to improve and hover around 32% mark in FY24 on back of ~10% topline growth. Continue with our expectation of a lack of margin surprise coupled with steady growth; Reduce stays with unchanged 35x FY24 EPS and revised TP Rs1,600 (earlier Rs1,500) as we raise FY23/24 estimates by 5-7%
Result Highlights
Torrent Pharma reported a better than expected revenue growth of 9% QoQ and 18% YoY including Curatio; excluding Curatio, underlying growth is reckoned around 16% YoY
India business up 17% and ex-Curatio around 13% YoY. Field force expanded and now stands at 5300
Germany bounces back as alluded in Q2 while Brazil rebounded 36% YoY on back of new launches and forex tailwind – cc growth at 17%
Margin in line at ~29.5% and included impact of lower margin Curatio consolidation and one-off 60bps impact
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