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Anand Rathi
Torrent Pharma (Buy)
Target: ₹3,195
CMP: ₹2,593.05
Impacted by product discontinuation in its US business and the lockdown in LATAM, Torrent Pharmaceuticals’ Q3-FY21 sales grew only 1.5 per cent to ₹2,000 crore. Its soft topline performance, however, was overshadowed by a 296 bps rise in its EBITDA margins to 30.4 per cent, primarily aided by better cost management.
The lower tax rate also boosted 18.3 per cent y-o-y adj. PAT growth to ₹300 crore. Its India business recorded sales of ₹930 crore, growing 6.8 per cent, and the company rationalised its field force to 3,600 MRs, which has inched up to ₹0.8m PCPM.
Torrent has generated cash-flow of ₹1,200 crore in 9M-FY20 (annualised FCF yield: 3.4 per cent) and this is likely to be maintained. Besides, management continues to boost MR productivity by launches and field-force rationalisation. It has reduced debt by ₹830 crore and aims to reduce it by a further ₹170 crore n in Q4-FY21.
Continued momentum in India and improved performance in Brazil and Germany are likely to aid 12.3 per cent/20.8 per cent growth in EBITDA/PAT over FY20-23.
We expect growth in its domestic business and debt repayment to be key earnings drivers in the next few years.
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