Torrent Pharma tumbles 14% on disappointing Q3 results

In Q3FY22, earnings before interest tax and depreciation and amortization (EBITDA) margins declined 490 bps YoY to 25.5 per cent driven by price erosion in the US.

Shares of Torrent Pharmaceuticals were down 14 per cent to Rs 2,705 on the BSE in Thursday’s intraday trade after the company reported disappointing December quarter (Q3FY22) results on the margins front. Profit after tax (PAT) declined 16 per cent year on year (YoY) to Rs 249 crore.

In Q3FY22, earnings before interest tax and depreciation and amortization (EBITDA) margins declined 490 bps YoY to 25.5 per cent driven by price erosion in US. The management said due to the prolonged delays in reinspection of US facilities on account of the pandemic, coupled with higher than anticipated pricing pressure, the company’s US business has been adversely affected during this quarter. “We have initiated cost optimisation measures which should help us get back on track with respect to margins in the upcoming quarters. Our India business continues to be on a strong footing delivering significantly higher than market growth during the quarter,” the management said.

Revenues grew 5.7 per cent YoY to Rs 2,108 crore, on back of 15 per cent YoY growth in domestic formulations business to Rs 1,072 crore. This was largely offset by 19.5 per cent YoY decline in the US due to price erosion in the base business and lack of new approvals amid pending re-inspection of facilities. Germany business de-grew 10.6 per cent YoY to Rs 237 crore mainly impacted by muted market growth and increasing competition in tender segment.

ICICI Securities maintains HOLD rating given the visible persisting challenges in the US business besides lower margin of safety (maintaining margins at high level) given high valuation.

In India, Torrent is expected to increase specialty focus, new introductions to leverage patent expiry. It is expanding field strength by ~500 MRs. Also, it forayed into fast growing trade generic segment for acute therapies. Torrent has a good presence in Brazil and expects traction in the branded markets with Germany expected to recover in FY23. The contributions from manufacturing facility at Levittown, US to start in FY23 are key triggers for future price performance, the brokerage firm said.