Strong Growth Predicted for Torrent Pharma Following Robust Q2 Performance

Torrent Pharmaceuticals saw its stock rise by over 1% on October 25 following a strong performance in the July-September quarter, which has prompted several brokerages to anticipate strong growth for the company.

Firms such as Motilal Oswal Financial Services, Nuvama Institutional Equities, HSBC, and Goldman Sachs have all expressed expectations of a robust growth trajectory, especially for Torrent’s core branded generics business in the domestic and Brazil markets.

Torrent Pharma reported a nearly 24% year-on-year increase in net profit for the September quarter, reaching Rs 386 crore, supported by a 16.1% rise in revenue to Rs 2,660 crore. While the bottom line exceeded CNBC-TV18’s estimate of Rs 377.9 crore, the top line was largely in line with expectations.

The quarterly earnings for the pharmaceutical company represented an all-round performance, with the EBITDA margin expanding to 31% in the July-September quarter, compared to 29.4% in the same period the previous year.

Goldman Sachs, which has a ‘buy’ rating on Torrent with a price target of Rs 2,325, noted that the EBITDA margin exceeded its estimates. Encouraged by this, the firm now predicts a more than 20% EBITDA CAGR (Compounded Annual Growth Rate) for Torrent Pharma’s overall business over FY23-26.

One of the highlights of Torrent Pharma’s Q2 earnings was its strong performance in domestic formulations and the Brazil market, which offset the subdued performance in its US business. The company achieved a 13% year-on-year growth in constant currency in the Brazil market, compared to the industry’s 8% growth. Additionally, its domestic business outperformed the mid-single-digit growth in the Indian Pharma Market, with an 18% growth during the quarter.

Goldman Sachs attributed the company’s strong growth in its core markets to its beat on profitability, and it maintains a positive long-term outlook. Nuvama is also impressed by Torrent Pharma’s consistent branded performance, and it believes the company is well-positioned to sustain its market-beating growth, thanks to the addition of 1,200 more sales representatives in the domestic market and the expectation of over 10% growth in the Brazil market in the long run. Nuvama has a ‘buy’ recommendation on the stock with a price target of Rs 2,410.

HSBC also maintains its positive stance on Torrent Pharma, with a ‘buy’ rating and a target price of Rs 2,200, highlighting the company’s structurally strong business profile.

Motilal Oswal Financial Services predicts superior execution by Torrent Pharma in the branded generics market in India and Brazil, with new launches and an increased field force contributing to sustained growth in Brazil. Despite ongoing price erosion in the US generics base business, new approvals are expected to drive growth prospects. The firm predicts a 14% sales CAGR, a 19% EBITDA CAGR, and a 34% PAT CAGR for the company over FY23-25. However, it has retained a ‘neutral’ recommendation on the stock with a price target of Rs 2,050, citing limited upside potential from current levels.

Torrent Pharma’s shares have risen over 21% year-to-date. As of 10:07 AM, the company’s shares were trading 1.2% higher at Rs 1,900.30 on the NSE.

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