Torrent Pharma Touted as Top Christmas Pick by Choice Broking’s Sumeet Bagadia; Here’s the Analysis

Sumeet Bagadia from Choice Broking has identified Torrent Pharma as his favored pick for ‘Christmas 2023,’ recommending a ‘Buy’ on the pharmaceutical stock at levels between ₹2,185 and ₹2,090. The target price set by Bagadia ranges from ₹2,420 to ₹2,490.

The decision is based on a notable technical pattern observed on the daily chart of Torrent Pharma, specifically a cup and handle formation. This pattern is considered bullish, indicating underlying strength and the potential for upward momentum. The analysis is reinforced by a significant support zone around 2090 levels, aligning closely with the 20-day Exponential Moving Average (EMA). The stock’s ability to maintain levels above crucial moving averages further supports the optimistic outlook.

Adding to the positive sentiment, the emergence of a bullish engulfing pattern enhances the likelihood of an upward trajectory in prices. This candlestick pattern typically signals a shift in market sentiment from bearish to bullish. The Relative Strength Index (RSI) stands at 65 levels and is on an upward trend, suggesting strengthening buying interest, complementing the broader technical picture, as per Bagadia.

Thus, based on the technical structure outlined above, Bagadia recommends a ‘buy’ position in the stock for the medium to long term.

Stock Performance:

In 2023 year-to-date, Torrent Pharma has witnessed a significant surge of 43%, and over the past year, the stock has shown a remarkable growth of 36%. In comparison, the Nifty Pharma index has advanced 30.5% in 2023 YTD and 27% in the last 1 year.

The pharmaceutical company has delivered positive returns in 8 out of the 12 months of 2023. In December alone, the stock has risen by 3.5%, building on the 10.5% jump observed in November.

Torrent Pharma reached its all-time high of ₹2,215.85 on December 22, marking a rally of over 53% from its 52-week low of ₹1,446.15 recorded on March 1, 2023.

In the September quarter, the company posted a consolidated net profit of ₹386 crore, a 24% increase from the previous year. Its revenue rose by 16% to ₹2,660 crore from ₹2,291 crore a year earlier. Earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at ₹825 crore, with an EBITDA margin of 32% in Q2FY24.

Fundamental View:

Motilal Oswal Financial Services emphasizes that Torrent Pharmaceuticals continues to excel in the branded generics market in DF and Brazil. The company is strategically expanding into additional growth levers, including trade generics and consumer healthcare, in India. The brokerage firm anticipates a 14%/19%/34% sales/EBITDA/PAT CAGR over FY23-25, reaching ₹12,400 crore/₹4,000 crore/₹2,200 crore.

Goldman Sachs maintains a ‘buy’ call on Torrent, setting a price target of ₹2,325. The firm predicts a robust EBITDA CAGR of over 20% for the overall business of Torrent Pharma from FY23-26. The positive outlook is attributed to strong growth in the drugmaker’s core markets and its ability to surpass profitability expectations.

Investors are likely to keep a close eye on Torrent Pharma as it continues to exhibit positive momentum and growth prospects.