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Anand Rathi
Torrent Pharmaceuticals (Buy)
CMP: ₹1,910
Target: ₹2,265
Key takeaways: a) India business to start growing in double digits from FY21: The India business reported 5 per cent y-o-y revenue growth (adjusted about 9 per cent) to ₹870 crore. Torrent continues to generate operational synergies and has further rationalised its sales force by 200 market representatives (MRs). It now has 4,000 MRs, averaging ₹7,20,000/month productivity (₹6,20,000 in March 2019). Management expects the domestic business to grow in double digits from FY21, supported by strong growth in its focused brands and traction in product launches.
b) Dahej plant re-inspection likely by June 2020: Remediation work at the two key US sites are ongoing. Management now expects the US FDA to re-inspect the Dahej site (OAI status) by June 2020 and Indrad by December 2020. It expects approvals in FY21 in mid-single digits
Valuation: We expect growth in Torrent’s domestic business to bounce back in FY21, and debt repayment should boost earnings in the next few years. We expect its EPS to register a 29 per cent CAGR over FY19-22 to ₹90 and a about 23 per cent RoE in FY22.
We maintain our ‘Buy’ recommendation and target ₹2,265 at 25x FY22e P/E.
Risks: Pricing risk in the domestic portfolio, currency fluctuations and regulatory issues at plants.
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