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India segment continues to drive growth

TRP 1QFY25 Revenue/EBITDA were in-line while PAT was a miss on our estimates. Overall sales were Rs28.6bn (+10% YoY) for the quarter. This was led by India/Germany segments delivering 15%/10% YoY growth respectively. However, Brazil grew a modest 3% YoY and US declined 12% YoY (CC: -9% YoY). Adjusting for a one-off expense of Rs0.2bn, EBITDA was Rs9.2bn (+17% YoY) with margins expanding 180bp YoY to 32.3% (our est 31.6%), due to better GM (+80bp YoY) and lower opex (down ~100bp YoY as % of sales). Adj. PAT grew 26% YoY to INR4.8b (our est INR5.2b) driven by lower finance costs (down 25% YoY) offset by lower other income (down 29% YoY) and higher tax rate of 29.4% (v/s 28.8% in 1QFY24). Over FY24-26E, we expect India sales to witness 16% CAGR led by continued outperformance over IPM. Also, we expect Brazil/Germany/US segment to witness 13%/10%/9% CAGR. Additionally, we expect EBITDA margins to expand 220 bp to reach 33.6% in FY26. The ETR in FY25/FY26 is expected to be 30%/26% respectively. Accordingly, we have revised our FY25/FY26 earnings estimates by -4%/8%. We value TRP at 37x FY26E EPS to arrive at a TP of Rs3,350. However, we see majority of the positives being already factored in the current price. Downgrade to ADD.

DF to continue outperforming IPM led by improving chronic market share

In 1QFY25, DF sales grew 15% YoY (v/s IPM growth of 8% YoY) to Rs16.4b, led by robust demand for chronic therapies. The chronic business grew at 14% YoY (vs IPM growth of 8% YoY), driven by strong revival in cardiac divisions and continued traction in anti-diabetes (OAD) new launches. TRP continues to focus on improving market share in chronic therapies, improving field force productivity in the expanded divisions and regions. Moreover, the focus is also on Tedibar franchise and other products of the Curatio portfolio which are expected to continue to deliver robust performance with margins expanding meaningfully. Accordingly, we expect a 16% sales CAGR in this segment to reach ~Rs77bn over FY24-26E.

Tender wins in Germany/New launches to drive Brazil segment

In 1QFY25, Germany sales increased 10% YoY (CC: 9% YoY) to Rs2.8bn led by continued growth momentum. We expect Germany sales to post 10% CAGR reaching Rs13b over FY24- 26, led by the recent tender wins. Moreover, Brazil sales grew at a modest 3% YoY (CC: 8% YoY) to Rs2b. It outperformed the local market by 100bp. This was led by new product launches as well as robust performance of top brands. During 1QFY25, TRP received Anvisa approval for three new products including Lisdexanfetamine. It expects to be in the first wave of branded generic launches in 2QFY25. TRP has currently nineteen products under ANVISA review. We expect Brazil segment to witness 13% sales CAGR to reach Rs14.4b over FY24-26.

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We have revised our FY25/FY26 earnings estimates by -4%/8%. We value TRP at 37x FY26E EPS to arrive at a TP of Rs3,350. We remain positive on TRP on the back of a) sustained outperformance of DF business led by robust growth in key brands such as Shelcal/Tedibar, increased MR productivity and scale-up of consumer health portfolio b) growth in Brazil/Germany segment, and c) US ramping-up meaningfully over the next 2-3 years. We expect revenue/EBITDA/EPS CAGR of 14%/18%/39% with margins expanding 220bp to 33.6% over FY24-26. However, we see majority of the positives being already factored in the current price. Downgrade to ADD.

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