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Target: ₹1,724
CMP: ₹1,520.85
Backed by growth in its BGx business in India, Brazil and the rest of the world (RoW), Torrent’s Q1 revenue grew 10 per cent year-on-year to ₹2,350 crore. Its gross margin expanded 107 basis points quarter-on-quarter to 72 per cent due to the higher BGx and Dapsone contribution. Lower other expenses (discontinued liquids business in the US) and R&D expenditure (5 per cent of sales) resulted in a 401-basis point quarter-on-quarter EBITDA margin improvement to 30.3 per cent. Going ahead, continued growth and product launches in India, Brazil and the RoW, and cost efficiencies (discontinued liquids business in the US) would drive revenue, EBITDA and PAT CAGRs of 10 per cent, 15 per cent and 24 per cent respectively over FY22-24.
The consistent growth momentum domestically (14 per cent year-on-year to ₹1,250 crore), in Brazil (20 per cent to ₹180 crore) and the RoW (16 per cent to ₹250 crore) drove Q1 revenues. Better traction in chronic therapies and trade generics, launches (7-8 per quarter) and improved medical representatives’ (MR) productivity (300 MR added in the gastro, cardiac and diabetes divisions) would boost its India business at a 13 per cent CAGR over FY22-24. Similarly, price hikes and launches in Brazil (five in six months) and in the RoW would drive 13 per cent and 9 per cent CAGR over FY22-24 respectively.
For the past few quarters, the US sales have been a steady $39 million. Adjusted for a one-time “settlement” income of $4 million, however, they were $35 million. Price erosion was partially offset by the contribution from Dapsone. Torrent targets 10-12 filings in FY23. We expect its US sales to grow a mere 3 per cent over FY22-24. It awaits US FDA re-inspection of its Indrad and Dahej plants.
Strong growth in its domestic chronic therapies along with launches in India, Brazil and the RoW would drive 24 per cent earnings growth for FY22-24.
Risks: Pricing risk in its domestic portfolio,currency fluctuations, regulatory issues at plants.
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