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With healthy growth in its branded business (India, Brazil, RoW) offset by weak Germany and US sales, Torrents Q2 revenue was up only 7% y/y to Rs22.9bn. Stable raw material prices sequentially led to a flattish 72% gross margin. This and normal other expenses led to a 70bp q/q drop in the EBITDA margin to 29.6%. Slightly lower interest, depreciation and tax restricted the PAT decline to 1.3% (Rs3.1bn). On the good traction in its brand-name generics business through launches, market-share gains and greater MR productivity, we expect 11%, 15% and 21% CAGRs over FY22-25 in respectively revenue, EBITDA and PAT. We retain a Buy rating on the stock, at a higher TP of Rs.1,915 (18x FY25e EV/EBITDA).

Growth driven by brand-name generics. Brand-name generics grew 13% y/y, driven by launches and the good performances in top brands. Torrent launched several products in its home and the Brazilian markets, such as Sitagliptin in India, Rivaroxaban and the CNS division in Brazil. Even growth was good, competition has been keen. It recently acquired Curatio (Paedeatric + Dermatology) which would contribute in Q3 (two months’ sales). We expect brand-name generics (70% of sales) to grow a healthy 14% over FY22-25.

Slowness in growth from other regions. A few launches and tender wins in Germany would drive single-digit revenue growth. The base business in the US is faced with severe price erosion (double-digit); new product approvals would take time as (the Indrad and Dahej) plants are under US FDA observations. The “other emerging markets” (Russia, Malaysia, Thailand, Kenya and a few others) currently generate $10m. Ahead they are expected to contribute substantially.

Valuation. Strong growth in domestic chronic therapies and launches in India, Brazil and the RoW would drive 21% earnings growth in FY22-25. We retain a Buy, with a higher target price of Rs1,915. Risks: Pricing risk in its domestic portfolio, currency fluctuations, regulatory issues at plants.

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