30 July 2013
1QFY14Results Update | Sector:
Healthcare
Torrent Pharmaceuticals
BSE SENSEX
19,593
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel.Per (%)
S&P CNX
5,832
TRP IN
169.2
71.2/1.2
459/304
2/19/11
CMP: INR421
TP: INR477
Buy
Financials & Valuation (INR m)
Y/E MAR
Net Sales
EBITDA
Adj PAT
2013 2014E 2015E
30,540 37,329 42,307
6,930 7,336 8,358
4,330 5,031 5,772
29.7
7
108
30.7
29.6
14.2
3.9
34.1
15
133
28.3
28.7
12.3
3.2
Adj.EPS (INR) 27.8
Growth (%) 43
BV/Share
85
(INR)
RoE (%)
35.8
RoCE (%)
P/E (x)
P/BV (X)
33.5
15.1
5.0
Torrent Pharma’s (TRP) revenue, adjusted for one-time income of INR420m, grew
21.3% YoY to INR9.3b (v/s est. INR8.99b). Adjusted EBITDA grew 20.5% YoY to
INR1.88b (v/s est. of INR1.83b), with EBITDA margin at 20.2% (est. 20.4%).
Adjusted PAT grew 26.7% to INR1.29b (above est. INR1.19b).
Sales growth was driven by stronger-than-expected growth in Europe, while the
US grew 40% YoY as expected. Brazil continued to report a decline of 2% YoY (as
expected), while RoW, Russia and CIS markets posted a healthy 23% YoY growth.
Domestic formulations growth was also in line with expectation at 13% YoY.
EBITDA growth was impacted by adverse sales mix, with higher contribution from
Europe (low margin business) and price pressures in Brazil. Other factors were (1)
forex loss of INR130m and (2) inventory write-down of INR220m.
Concall highlights: (1) India: Revival of growth in acute segment continues; see
signs of improving MR productivity. (2) Brazil: Price reduction in two key products
due to increasing competition; increasing focus on generic. (3) US: High growth to
sustain driven by five to six launches in FY14. (4) Europe: High growth to sustain
due to contribution from new markets of the UK and Romania.
Based on 1QFY14 performance, we increase EPS estimates for FY14E/15E by 4%/3%
mainly to reflect the higher growth in Europe. Over the last six years, TRP delivered
30% EPS CAGR, even as capital employed CAGR was just 17.6%. It consistently
improved profitability, with RoCE increasing from 14.5% in FY05 to 35.7% in FY13.
Based on revised estimates, we expect 20% EPS CAGR over FY12-15E, led by 17%
revenue CAGR. Its high return ratios are likely to sustain, despite large capex and
growing cash on the books. We believe current valuations do not reflect the
improvement in business profitability (exl. Europe), scale-up of international
operations and TRP’s strong positioning in domestic formulations, particularly in
chronic therapeutic segments. The stock trades at 14.2x FY14E and 12.3x FY15E EPS.
Maintain
Buy
with a target price of INR477 (14x FY15E EPS).
Alok Dalal(Alok.Dalal@MotilalOswal.com);+91
22 39825584
Hardick Bora(Hardick.Bora@MotilalOswal.com);+91
22 3982 5423
Investors are advised to refer through disclosures made at the end of the Research Report.