19 May 2021
4QFY21 Results Update | Sector: Healthcare
Torrent Pharma
Neutral
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
CMP: INR2,723
Steady outperformance in the Branded Generics segment
US business at a trough; expect a gradual recovery from here on
TRP IN
169
460.9 / 6.3
3040 / 2232
1/-12/-58
1618
TP: INR2,530 (-7%)
Financials & Valuations (INR b)
Y/E MARCH
2021 2022E 2023E
Sales
80.1 90.1 99.4
EBITDA
25.0 27.9 30.3
Adj. PAT
12.7 14.6 16.4
EBIT Margin (%)
23.0 23.4 23.2
Cons. Adj. EPS (INR)
74.9 86.1 96.8
EPS Gr. (%)
33.5 14.9 12.5
BV/Sh. (INR)
345.0 387.3 449.2
Ratios
Net D:E
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
EV/EBITDA (x)
Div. Yield (%)
FCF Yield (%)
EV/Sales (x)
0.6
23.8
16.4
37.1
36.3
19.6
0.8
3.6
6.1
0.4
23.5
17.7
36.1
31.6
17.2
0.9
4.4
5.3
0.3
23.1
18.8
36.1
28.1
15.4
1.1
4.9
4.7
Product mix/controlled cost drive earnings in 4QFY21
TRP’s 4QFY21 result was marginally below our estimates at an operational
level, led by a sharp YoY decline in US and CRAMS sales. It continues to build
its product portfolio and enhance marketing efforts to outperform in Brazil,
Germany, and the Branded Generics segment in Domestic Formulation (DF).
It is also working on alternate site filings to reduce the regulatory risk in the
US Generics business.
We have maintained our FY22E/FY23E EPS estimate and continue to value
TRP at 25x 12-month forward earnings to arrive at a TP of INR2,530. Gradual
revival in demand for Branded Generics, with the lowering of COVID-19
caseloads; increasing vaccination pace in focus geographies of India, Brazil,
and Germany; and subsequent promotional efforts would enable the
company to deliver better growth in these markets going forward. The
ANDA pipeline remains healthy for the US market. However, product
approval largely hinges on the resolution of USFDA issues. We maintain our
Neutral rating as current valuation adequately factors in improving outlook
in DF/Germany/Brazil .
Revenue remained flat YoY at INR19.4b (est. INR20.4b) in 4QFY21. The
24%/10% YoY growth in Germany/DF (14%/48% of sales)
was
offset by a
30%/10% decline in US/Brazil (14%/10% of sales) in 4QFY21. Even
RoW/Contract Manufacturing sales fell 4%/10% YoY (10%/5% of sales).
Gross margin expanded 150bp YoY to 74.4% due to change in the product
mix. EBITDA margin expanded at a higher rate (190bp YoY) to 30% (est.
29.9%). EBITDA margin expansion was driven by lower other expense (-70bp
YoY as a percentage of sales), partially offset by higher employee cost.
EBITDA grew 6% YoY to INR5.8b (est. INR6.1b).
PAT grew at a higher rate (38% YoY) to INR3.2b (est: INR2.9b), due to better
EBITDA margin and higher other income, partially offset by a higher tax rate
in 4QFY21.
Sales remained almost flat YoY at INR80b in FY21, while EBITDA/PAT grew
15%/34% to INR25b/INR12.7b.
While the US business declined 30% YoY in 4QFY21 due to lack of approvals
and base business price erosion, TRP has taken measures like: a) transferring
products to alternate sites, b) re-start of commercialization from Levittown
facility from Jun’21, and c) re-launch of Sartans to mitigate the decline in US
sales over the near to medium term.
TRP awaits outcome of the district court on Para IV litigation for Dapsone.
It launched three products in the DF market during 4QFY21. About 6-7% of
growth is expected to be driven by better pricing.
MR strength/monthly productivity stands at 3,600/INR0.85m.
R&D for FY22 to be 6-6.5% of sales.
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
71.3
71.3
71.3
8.4
8.1
10.9
11.4
12.0
9.8
9.0
8.7
8.1
FII Includes depository receipts
Highlights from the management commentary
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Tushar Manudhane - Research Analyst
(Tushar.Manudhane@MotilalOswal.com)
Bharat Hegde, CFA
(Bharat.hegde@motilaloswal.com);