Torrent Pharmaceuticals
BSE SENSEX
31,028
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
9,595
TRP IN
169
207.4 / 3.2
1768 / 1186
-19/-28/-29
381
28.8
28 May 2017
4QFY17 Results Update | Sector: Healthcare
CMP: INR1,224 TP: INR1,450(+19%)
Muted performance in key markets impacts results
Buy
Financials & Valuations (INR b)
2017
2018E
Y/E Mar
Net Sales
58.6
65.4
EBITDA
13.8
15.9
PAT
9.3
10.1
EPS (INR)
55.2
59.8
Gr. (%)
-7.6
8.3
BV/Sh (INR)
235.5
273.7
RoE (%)
25.3
23.5
RoCE (%)
21.3
21.3
P/E (x)
22.2
20.5
P/BV (x)
5.2
4.5
2019E
76.1
19.0
12.4
73.2
22.4
320.5
24.6
23.7
16.7
3.8
Estimate change
TP change
Rating change
TRP reported sales of INR13.8b (-8% YoY; ~8% below est.), with EBITDA of
INR2.95b (est. of ~INR3.4b) and PAT of INR2.1b (-42% YoY; est. of INR2.3b).
The miss in numbers is attributed to weak sales in India and the US due to
pricing pressure and limited launches. For FY17 sales, EBITDA and PAT
stood at INR58.6b (-12.3%YoY), INR13.8b (-49%YoY) and INR9.3b (-48%YoY)
respectively.
US, India deliver muted performance:
US business
declined 45% YoY (-10%
QoQ) to INR2.8b due to continued pricing pressure in base business and
limited launches YTD. We expect this business to remain under pressure in
FY18 due to further price erosion in base business, partially offset by 8-10
new launches in FY18E (~25 pending ANDAs; six approved ANDAs that were
not launched in FY17). TRP is also focusing on in-licensing of products in the
US.
India business
grew at ~6% YoY, with chronic and sub-chronic segment
secondary sales outpacing industry growth. The company expects India
business to grow in double-digits, led by strategic initiatives undertaken
since 2QFY16.
Earnings call takeaways:
1) 16 ANDAs filed in FY17; re-looking R&D
strategy – will focus on complex products requiring clinical trials. 2) Mid-
teens pricing pressure expected in FY18 in the US. 3) Normalized
depreciation rate of ~INR800-810m/quarter v/s INR970m in 4Q. 4) Capex of
INR4b expected in FY18/FY19 toward Sikkim expansion and Onco block &
Dahej Phase-2. 5) Renagel launch deferred for more than one year. 6) Tax
rate to stay at ~20% in FY18. 7) Germany sales to grow at >15% YoY. 8)
Govt. allowed price increase in Brazil; to be ~3% in FY18 v/s ~12.5% in FY17.
Current price more than factors in concerns:
Although growth in the US
and India will continue to be under pressure in FY18 (due to pricing
pressure in the US and GST rollout in India), we believe the impact of these
issues is more than factored in the current price. Maintain
Buy
with a TP of
INR1,450, @20x FY19E PER (v/s INR1,700 @ 20x 1HFY19E EPS). We cut
FY18E/19E EPS by 19-20% as we build in the impact of higher pricing
pressure in the US and lower EBITDA margin.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Kumar Saurabh
(Kumar.Saurabh@MotilalOswal.com); +91 22 6129 1519
Tushar Manudhane
(Tushar.Manudhane@MotilalOswal.com); +91 022 6129 1536

Torrent Pharmaceuticals
Exhibit 1: US revenues declined ~46%YoY in constant currency terms
US sales (USD m)
20
19
31
101
66
30
32
41
140 110
84
78
65
48
46
42
Source: Company, MOSL
Exhibit 2: Domestic revenues posted muted growth of ~5%YoY in 4QFY17
India sales (INR b)
54.7
49
41
39.1
12
3
10
3
15
3
17
13
4
4
4
4
5
YoY growth (%)
-0.2
4
6.2
4
12.9
4
2.6
5
12.5 12.8
5
5
4.5
5
3
Source: Company, MOSL
Exhibit 3: Brazil revenues grew ~82%YOY aided by price hikes
Brazil (INR b)
YoY growth (%)
82
28
12
-4
1
1
2
2
1
5
10
1
-7
1
-18
21
1
-24
1
-16
2
20
35
2
2
2
Source: Company, MOSL
Exhibit 4: EBITDA margins contracted ~100bp QoQ
EBITDA (INR b)
46.7
28.6 31.0
EBITDA margin (%)
43.3
39.8
32.3
Exhibit 5: PAT declined ~42%YoY
PAT (INR m)
105.0
71.875.2
26.1
17.417.9
YoY growth (%)
2.1
2.1 2.3
(35.0)
(34.2)
(59.3) (42.3)
18.4 21.2
22.4 20.5
29.0
14.0
23.5 22.4 21.4
157.1 174.6
108.4
75.4
1.8 2.2 3.5 3.5 2.7 2.4 1.6 9.1
7.2 6.1
4.8 4.4
3.3 3.2 3.0
(46.7)
1.1 1.3 2.4 2.6 2.0 1.7 1.3 4.5 5.1 3.5 3.6 2.9
Source: Company, MOSL
28 May 2017
Source: Company, MOSL
2

Torrent Pharmaceuticals
Key Con-call takeaways
Company launched 21 products during FY17. Launched 1 product last month
which is completely new in India, with a market size of INR7.4b.
Other income was high mainly due to forex income.
Company expects double digit growth from Brazil on back of increased market
share. In last 6 months launched 2 products
Received 12 approvals from its Dahej facility and expects 10 more product
approvals from this facility in next 9-10 months.
It does not plan to increase MRs which currently stands at 2800 and 3400 total
field force.
Capex in FY18E and FY19E to be ~INR4b for its Sikkim Onco facility capacity
expansion and Dahej Phase II
Company now has 5 brands in INR5b revenue club as against 2 brands
previously.
FY18E
FY19E
% change
-5.40%
-11.70%
-19.10%
New
76
19
12
Old
80.1
21.6
15.5
% change
-5.00%
-11.90%
-20.10%
Source: Company, MOSL
Exhibit 6:
Change in Estimate
New
65
16
10
Old
69.1
18
12.5
Sales
EBITDA
PAT
Exhibit 7:
Operating Metrics
1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17
Revenue Mix (%)
USA
India
Europe
Brazil
RoW
CRAMs
Revenue Growth (%)
USA
India
Europe
Brazil
RoW
CRAMs
Cost of sales
Raw material
Staff cost
Other expenses
Tax Rate
Margins (%)
Gross Margins
EBITDA Margins
EBIT Margins
PAT margins
24.1
31.7
22.3
13.4
6.0
2.5
20.9
137.6
13.1
27.0
12.0
(21.2)
(58.2)
70.4
27.6
16.8
26.0
26.6
72.4
31.0
29.1
23.0
13.7
36.3
15.6
13.1
7.8
13.4
28.7
45.2
48.8
(19.1)
28.0
(2.1)
63.0
78.5
31.7
18.6
28.2
15.7
68.3
22.4
17.8
16.3
14.6
36.0
19.4
13.4
9.1
5.7
16.8
15.5
41.4
(8.5)
5.4
11.6
15.0
80.3
32.2
17.2
30.9
16.9
67.8
20.5
15.9
14.3
19.5
34.3
19.0
12.2
8.6
6.4
(6.1)
(43.8)
54.7
(12.7)
10.2
(3.9)
(10.0)
87.5
31.8
20.7
34.9
16.1
68.2
14.0
8.8
11.3
45.6
25.2
12.4
7.1
3.9
5.7
75.8
230.7
39.1
(2.8)
(7.4)
13.4
296.4
54.0
21.7
10.9
21.3
47.7
78.3
46.7
43.7
23.1
42.1
26.1
11.0
7.7
4.7
8.3
38.5
326.3
(0.2)
(2.1)
(18.1)
(15.8)
(13.5)
58.9
22.7
12.5
23.7
25.3
77.3
43.3
39.7
30.7
36.2
29.0
12.7
7.7
4.9
9.5
30.9
226.0
6.2
(14.1)
(24.4)
(28.3)
135.1
61.1
24.6
13.6
23.0
3.6
75.4
39.8
35.9
22.6
34.3
29.8
12.7
7.9
5.1
10.1
30.0
128.4
12.9
(13.2)
(15.6)
(22.2)
111.1
68.9
27.9
15.6
25.4
11.9
72.1
32.3
28.0
23.8
27.4
31.8
11.8
10.5
7.3
11.1
(19.6)
(51.1)
2.6
(22.7)
21.0
51.3
24.3
73.5
29.0
16.7
27.8
15.6
71.0
29.0
24.5
19.4
22.2
34.2
14.4
10.8
7.1
11.4
(14.2)
(54.8)
12.5
12.4
19.8
28.8
0.7
78.2
28.5
18.4
31.2
18.2
71.5
23.5
18.6
14.7
21.1
34.3
13.9
10.8
8.2
11.7
(4.7)
(44.4)
12.8
4.6
34.7
57.9
0.7
79.8
32.8
16.5
30.4
6.5
67.2
22.4
17.2
16.2
19.6
32.6
16.4
15.1
8.2
8.2
3.1
(45.3)
4.5
23.7
81.5
51.9
(22.4)
82.5
35.5
18.0
29.0
15.6
64.5
21.4
14.3
14.9
Source: MOSL, Company
28 May 2017
3

Torrent Pharmaceuticals
Story in charts
Exhibit 1: Formulation biz to grow at 13% CAGR FY17-19E
Formulations (INR b)
CRAMS (INR b)
6
3
2
19
3
24
3
28
38
44
61
53
58
68
2
5
5
34.6
-5.1
32.8
37.3
7.2
-49.3
4
FY11
5
FY12
7
FY13
10
FY14
10
FY15
27
FY16
14
16
19
15.3
19.8
6
Exhibit 2: EBITDA to exhibit robust growth
EBITDA (INR b)
EBITDA growth (%)
166.6
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
Source: Company, MOSL
FY17 FY18E FY19E
Source: Company, MOSL
Exhibit 3: Chronic segment to drive domestic revenues
Revenues (INR b)
38.5
YoY Growth (%)
Exhibit 4: US – New launches to spur growth FY19E onwards
US revenues (USD m)
412
137
200
95
8
-51
-10
16
201
180
208
YoY Growth (%)
15.5
8.5
8
FY11
9
FY12
12.7
10
FY13
13.5
12
FY14
16
FY15
13.4
18
FY16
15.0
8.3
20
23
15.0
26
25
31
45
81
65
44
127
FY17 FY18E FY19E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 5: Brazil - Robust recovery ahead
Brazil (INR b)
YoY Growth (%)
38%
32%
20%
5%
3.6
FY11
4.8
FY12
5.0
FY13
5.3
FY14
6.1
FY15
6%
13%
5.1
-17%
FY16
7.0
FY17
8.4
FY18E
10.2
FY19E
20%
22%
Source: Company, MOSL
28 May 2017
4

Torrent Pharmaceuticals
Valuation and view
Though growth in US and India market will continue to be under pressure in FY18
due to pricing pressure in US and GST roll out, we believe impact of these issues are
more than factored in the current market price. Maintain Buy with a target price of
INR1450, @20x FY19E PER (v/s INR1,700 @ 20x 1H FY19E EPS). We have cut our
FY18/19E EPS by ~18% as we build in impact of higher pricing pressure in US and
lower EBITDA margins
Key catalysts to drive stock’s performance over the medium term are:
Improvement in EBITDA margin, mainly on stronger contribution from Elder
brands
Limited competition launches in US.
Risks to our investment thesis
Regulatory delays could affect timely launch of key US launches.
Increased span of drug price control could hurt domestic business.
Volatile currency and macroeconomic outlook for key emerging markets namely
Brazil could hamper growth prospects.
Exhibit 9: TRP trades at 7% premium to Sensex PE
Avg(x)
27.2
Min(x)
50
17.0
0
-20.4
-50
3.8
-100
Torrent Pharma PE Relative to Sensex PE (%)
LPA (%)
Exhibit 8: TRP trades at 18x (1 yr fwd)
30
23
16
9
2
14.0
PE (x)
Peak(x)
-7.8
Source: Company, MOSL
Source: Company, MOSL
28 May 2017
5

Torrent Pharmaceuticals
Financials and Valuations
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2012
26,961
22.7
5,218
19.4
817
4,400
395
445
-863
3,588
730
20.3
23
2,835
3,287
21.7
2012
423
11,515
11,938
5,786
514
18,274
11,990
4,022
7,968
1,188
1,240
20,081
5,315
5,228
6,743
2,795
12,202
10,395
1,807
7,878
18,274
2013
32,120
19.1
6,930
21.6
830
6,100
340
430
-370
5,820
1,470
25.3
20
4,330
4,705
43.1
2013
423
13,796
14,219
7,030
257
21,510
12,785
4,587
8,198
2,853
605
25,872
9,239
6,878
6,270
3,485
16,017
12,297
3,720
9,855
21,510
2014
41,840
30.3
9,514
22.7
870
8,644
586
381
0
8,439
1,801
21.3
0
6,638
5,385
14.4
2014
846
18,178
19,024
11,418
-182
30,264
14,200
5,447
8,753
5,341
1,857
34,091
10,061
10,994
7,694
5,342
19,777
16,239
3,538
14,314
30,265
2015
46,530
11.2
10,202
21.9
1,907
8,295
1,752
2,856
0
9,398
1,888
20.1
0
7,510
5,650
4.9
2015
846
24,059
24,906
25,040
1,047
50,997
35,429
7,103
28,327
6,783
2,977
40,183
10,672
15,945
5,674
7,892
27,273
22,890
4,383
12,910
50,996
2016
66,760
43.5
27,201
40.7
2,460
24,741
1,859
2,156
-1,400
23,639
5,601
23.7
0
18,038
10,109
78.9
2016
850
33,040
33,890
18,670
220
52,780
42,396
9,988
32,407
6,783
7,600
41,360
13,580
14,450
6,470
6,860
35,370
30,910
4,460
5,990
52,781
2017
58,570
-12.3
13,780
23.5
3,070
10,710
2,060
2,230
0
10,880
1,540
14.2
0
9,340
9,340
-7.6
2017
850
39,008
39,858
11,880
2,000
53,738
45,396
12,816
32,580
6,783
7,600
41,211
13,507
13,471
6,687
7,546
34,194
27,791
6,403
7,017
53,980
(INR Million)
2018E
65,395
11.7
15,891
24.3
3,263
12,628
1,485
1,500
0
12,643
2,529
20.0
0
10,115
10,115
8.3
2018E
850
45,470
46,320
7,880
2,000
56,200
48,396
16,079
32,317
6,783
7,600
46,178
14,895
15,041
7,942
8,301
36,436
29,654
6,782
9,743
56,443
2019E
76,132
16.4
19,033
25.0
3,777
15,256
1,182
1,500
0
15,574
3,193
20.5
0
12,381
12,381
22.4
2019E
850
53,380
54,230
3,880
2,000
60,110
51,396
19,856
31,540
6,783
7,600
56,386
17,225
17,510
12,520
9,131
41,956
34,289
7,667
14,430
60,353
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
(INR Million)
28 May 2017
6

Torrent Pharmaceuticals
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2012
19.4
21.6
70.5
8.5
29.2
63.0
56.7
17.3
7.6
39.5
0.7
29.7
24.1
42.0
1.6
71
72
-0.1
2012
5,218
445
902
-696
-863
5,006
-1,736
3,270
220
0
-1,516
0
85
-395
-1,226
-1,535
1,955
4,788
6,743
2013
27.8
30.5
84.0
23.0
52.3
44.0
40.1
14.6
6.5
30.0
1.9
36.0
25.6
44.5
1.6
78
105
0.1
2013
6,930
430
-2,449
-1,728
-370
2,813
-2,460
353
636
0
-1,825
0
1,212
-340
-2,334
-1,462
-473
6,743
6,270
2014
31.8
44.4
112.4
10.0
29.8
38.5
27.6
10.9
5.0
22.2
0.8
32.4
27.5
50.1
1.6
96
88
0.2
2014
9,514
381
-3,034
-2,239
0
4,622
-3,904
718
-1,252
0
-5,156
423
4,388
-586
-2,266
1,959
1,425
6,270
7,694
2015
33.4
55.7
147.2
11.3
29.7
36.7
22.0
8.3
4.9
22.2
0.9
25.7
22.2
26.0
1.1
125
84
0.8
2015
10,202
2,856
-617
-660
0
11,781
-22,923
-11,142
-1,120
0
-24,043
599
13,623
-1,752
-2,228
10,241
-2,021
7,694
5,673
2016
59.7
121.1
200.3
34.8
39.5
20.5
10.1
6.1
3.3
8.1
2.8
34.4
40.7
56.9
1.3
79
74
0.4
2016
27,201
2,156
7,716
-6,428
-1,400
29,246
-6,541
22,705
-4,624
0
-11,164
-1,925
-6,374
-1,859
-7,128
-17,285
796
5,674
6,470
2017
55.2
73.3
235.5
16.5
36.1
22.2
16.7
5.2
3.6
15.4
1.3
25.3
21.3
28.5
1.1
84
84
0.1
2017
13,780
2,230
-810
240
0
15,440
-3,242
12,197
0
0
-3,242
0
-6,790
-2,060
-3,372
-12,222
-25
6,470
6,445
2018E
59.8
79.1
273.7
17.8
36.1
20.5
15.5
4.5
3.2
13.0
1.5
23.5
21.3
30.4
1.2
84
83
0.0
2018E
15,891
1,500
-1,470
-2,529
0
13,393
-3,000
10,393
0
0
-3,000
0
-4,000
-1,485
-3,652
-9,137
1,256
6,687
7,942
2019E
73.2
95.5
320.5
21.8
36.1
16.7
12.8
3.8
2.6
10.4
1.8
24.6
23.7
36.2
1.3
84
83
-0.2
2019E
19,033
1,500
-110
-3,193
0
17,230
-3,000
14,230
0
0
-3,000
0
-4,000
-1,182
-4,471
-9,653
4,578
7,942
12,520
Cash Flow Statement
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
(INR Million)
28 May 2017
7

Torrent Pharmaceuticals
Corporate profile
Company description
Torrent Pharma is one of the second tier Pharma
companies that is actively targeting the regulated
generics and semi-regulated markets. The company has
strong presence in domestic market with focus and
leadership in CVS and CNS segments. Recent acquisition
of Elder’s brand in India strengthens its positioning
further. The company has large presence in some of the
key global markets like Brazil and Germany.
Source: MOSL/Bloomberg
Exhibit 1: Sensex rebased
Exhibit 2: Shareholding pattern (%)
Mar-17
Promoter
DII
FII
Others
71.3
7.9
9.7
11.2
Dec-16
71.3
7.5
10.3
11.0
Mar-16
71.3
7.3
10.5
11.0
Source: Capitaline
Exhibit 3: Top holders
Holder Name
HDFC TRUSTEE CO LTD- HDFC MULTIPLE
YIELD FUND- PLAN 2005
BIRLA SUN LIFE TRUSTEE COMPANY PRIVATE
LIMITED AC BIRLA SUN LIFE BALANCED 95
FUND
LAVENDER INVESTMENTS LIMITED
FRANKLIN INDIA MONTHLY INCOME PLAN
NA
% Holding
1.6
1.4
1.3
1.2
0.0
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Samir Mehta
Sudhir Mehta
Mahesh Agrawal
Designation
Executive Chairman
Chairman Emeritus
Company Secretary
Exhibit 5: Directors
Name
Markand Bhatt
Ashish Nanda
Pradeep Bhargava
Shailesh Haribhakti
Name
Chaitanya Dutt
H Khaitan
Renu Challu
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
Deloitte Haskins & Sells
Kirit Mehta & Co
Type
Statutory
Cost Auditor
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
FY19
Source: Capitaline
MOSL
forecast
54.9
59.5
72.8
Consensus
forecast
56.3
68.3
81.9
Variation (%)
-2.4
-12.8
-11.1
Source: Bloomberg
28 May 2017
8

Torrent Pharmaceuticals
NOTES
28 May 2017
9

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Torrent Pharmaceuticals
Disclosure of Interest Statement
Analyst ownership of the stock
No
Served as an officer, director or employee -
No
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TORRENT PHARMACEUTICALS
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28 May 2017
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