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Domestic formulation; Brazil outshines for the quarter On-track to build revenue synergy from JB Pharma integration

* Torrent Pharma (TRP) delivered slightly better-than-expected revenue/EBITDA (+3%/5%) for the quarter. Earnings were largely in line with estimates due to higher-than-expected tax rate for the quarter.

* TRP outperformed domestic formulation industry (IPM) growth by a wide margin, led by market share gains in chronic therapies, robust scale-up of Curatio portfolio, and healthy market share in the Semaglutide product.

* Notably, TRP outpaced the Brazilian branded generics market, led by new launches, volume growth, pricing, and inventory normalization.

* TRP remains on track to rationalize costs related to JB Pharma by integrating the field force and driving cross-selling across both TRP and JB Pharma portfolios in the DF market.

* US revenue grew 13% YoY in CC terms, driven by new launches and market share gains. Germany continued to face supply disruptions and pricing pressure, with a gradual recovery expected over the medium term.

* We have reduced our FY27/FY28 earnings estimates by 5% each to factor in: a) higher interest costs, b) near-term integration-related disruptions at the JB Pharma international business, and c) continued weakness in the Germany business.

* We value TRP at 52x 12-month forward earnings to arrive at a TP of INR4,970. We remain constructive on TRP's domestic growth prospects, expanding Semaglutide opportunity, and potential earnings benefits from JB Pharma integration. However, we reiterate our Neutral rating, given the limited upside from current levels.

Strong operating growth; PAT impacted by higher costs

* On a reported basis, sales grew 50.8% YoY to INR49.8b (our est: INR48.1b), led by robust show in DF/US/Brazil and addition of the JB Pharma business.

* Gross margin contracted 40bp to 75.4% for 2QFY27.

* EBITDA margin expanded 70bp YoY to 33.5%, due to a decline in staff cost as % of revenue (down 100bp YoY).

* Accordingly, EBITDA grew 53.8% YoY to INR16.7b (vs our Est: INR15.9b).

* Adj. PAT declined 9.9% YoY to INR5.4b (vs our est: INR5.5b), majorly impacted by higher interest costs and depreciation.

* For 1HFY27, Revenue/EBITDA grew 52.8%/56.3%, while PAT declined 3.1% YoY

Highlights from the management commentary

* TRP expects the DF segment to grow 12% in FY27, with growth of ~10% YoY sustained in FY28.

* TRP expects to maintain its MR strength at ~9,100 in FY27 and evaluate the addition of ~500 MRs in the DF segment in FY28.

* The Curatio portfolio remains on a strong growth path, driven by robust demand. It now forms 7-8% of TRP’s base DF business vs 4-5% at the time of acquisition.

* The Semaglutide market has reached INR8b on annual basis. TRP expects the molecule to sustain strong industry-level growth over the next couple of years.

* About one-third of TRP’s growth in Brazil is driven by price increases, volume growth, and new launches. The Brazil business is expected to sustain doubledigit to mid-teens YoY growth over the next 12-15M.

* Management plans to launch GLP-1 generic in Brazil within the next 6-9 months.

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