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Strong show across branded generics market

Quick Pointers:

* Adj for Rs150mn one off expenses; OPM were at32.9%

* Launched Sacubitril Valsartan last week in US markets

Torrent Pharma’s (TRP) Q1FY26 adjusted EBITDA was broadly in line with our estimates. Our FY26/ FY27E EBITDA broadly remain unchanged. TRP reported Rs 90bn (80% of total sales) worth of highly profitable branded formulation sales spread across India, Brazil and RoW markets. The acquisition of JB Chemicals & Pharma (JBCP) appears strategically compelling, making it the 5th largest player in the domestic pharma market. This will further be strengthening its position in high-margin chronic therapies and opens up many newer therapeutic areas. The deal also adds JBCP’s CDMO vertical, offering diversification and growth optionality

The deal is considered financially attractive and strategically sound with long -term earnings accretion. TRP trades at 23x EV/EBITDA on FY27E for the combined business. We maintain our Accumulate with revised TP of Rs4,000/share, valuing at 26x EV/EBITDA on FY27E for combined entity. Guidance for key synergies from JBCP deal will key.

* Healthy revenue growth across segments: Revenues grew by 11% YoY to Rs 31.8bn, in line with our estimates. Domestic business grew by 11% YoY. US sales improved 3% QoQ to $36mn. Brazil market was up 11% YoY. CC growth was strong at 16% YoY. Top brands and new launches supported growth. Germany delivered growth of 9% YoY to Rs 3.1bn aided by currency. CC growth was at 1% YoY impacted due to certain supply disruption. RoW including CRAMS growth was at 10% YoY.

* In line EBITDA; Adj OPM at 32.9%: GM remained steady at 75.3% flat YoY. TRP reported EBITDA of Rs 10.32bn (up 14% YoY), in line with our estimates. Acquisition related one-off expenses of Rs 150mn included in other expenses. Adjusted for this one-off, OPM for the quarter stands at 32.9%; up 130bps YoY. Other income came in negative to the tune of Rs 370mn led by forex loss. Other expenses were up 8% YoY and 9% QoQ. PAT stood at Rs 5.5bn; against our estimates of Rs 5.85bn. Adj for forex; PAT growth was +25% YoY; in line with estimates.

* Key concall takeaways: India: Domestic growth was aided by 6% price, 3.5% volume and 2.5 % new product launches. The chronic division achieved 13% growth, driven by outperformance in the Cardiac, Diabetic, Gastro and CNS portfolio. Contribution from consumer brands is 10-15% and remaining 85- 90% from prescription. Field force increased by 200 in Q1 to 6600 reps; expected to rise 6900-7000reps by FY26E. Torrent’s focus remains on increasing market share through new launches and improving field force productivity. Curatio brands continue to witness positive traction. Brazil: Registered growth on account of performance from top brands and new launches. Has 62 products in pipeline awaiting ANVISA approval. Guided for 2-3 launches per division annually. Semaglutide: Targeting day 1 launches in Brazil market. Currently mkt size for Ozempic is at $350mn while for Wegovy is $600mn. For India it is conducting phase 3 trials for oral form, partnered for injectable and aiming for first wave of launch. Germany: Growth impacted by 3rd party supply disruptions (partner compliance issues). It derives 75% of the business from 3rd party products. Enjoys 6% market share. US markets: Launched 4-5 products in Q1FY26. Targets 10 launches in FY26E. Launches Sacubitril Valsartan last week with 10 generic players on day 1. JBChemical Acquisition: Public offer & merger filings (including CCI) submitted. JB Chemical will add ~2,100 field force post-merger; expansion continues in nonoverlap areas. Other: Acquisition related one-off expenses of Rs 150Mn included in other expenses. Adjusted for this one-off, the underlying operating margin for the quarter stands at 32.9%. Margins to sustain at current levels in FY26E. Have booked Rs 480mn forex loss (transactional loss) in other income. Guided for 25-26% ETR. R&D spend and reinvestments will remain elevated but margin trajectory steady.

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