Torrent Pharma gains 3% in a weak market on healthy margins in June quarter

The company has launched baricitinib during the quarter and is currently conducting clinical trials for molnupiravir; more partnerships under evaluation to widen Covid portfolio

Shares of Torrent Pharmaceuticals were up 3 per cent at Rs 3,106 on the BSE in the intra-day trade on Wednesday, in an otherwise weak market, after the company reported healthy margins at 34 per cent for the quarter ended June 2021 (Q1FY22).

The stock of the drug maker rebound 7.5 per cent from its intra-low of Rs 2,890. It had hit a 52-week high of Rs 3,121.45 on Tuesday, July 26. In comparison, the S&P BSE Sensex was down 0.87 per cent or 456 points at 52,123 at 11:28 am.

Torrent Pharma’s Q1FY22 revenues grew 3.8 per cent year-on-year (YoY) to Rs 2,134 crore on the back of 18 per cent YoY growth in domestic formulations to Rs 1,093 crore. However, US revenues declined 29 per cent YoY at Rs 266 crore amid continuous price erosion in base business and lack of new approvals pending re-inspection of facilities.

As per All Indian Origin Chemists & Distributors (AIOCD) data, Torrent’s Q1FY22 growth was 24 per cent versus Indian Pharmaceutical Market (IPM) growth of 37 per cent. IPM growth during the quarter includes high contribution from Covid treatments and a low base last year.

The company’s Ebitda (earnings before interest, taxes, depreciation, and amortization) margins remained healthy at 34 per cent in Q1FY22, improved by 200 basis points (bps) from 32 per cent in Q1FY21. Profit after tax (PAT) during the quarter under review grew 2.8 per cent YoY to Rs 330 crore.

Torrent Pharma said it has launched baricitinib during the quarter and is currently conducting clinical trials for molnupiravir; more partnerships under evaluation to widen covid portfolio.

Torrent Pharma is ranked 8th in the IPM and is amongst the Top 5 in the therapeutics segments of Cardiovascular (CV), Central Nervous System (CNS), and Vitamins Minerals Nutritionals (VMN).

Analysts at HDFC Securities believe the US business ($36 million) has largely bottomed out and is likely to improve from current levels. In India, Torrent’s decision to foray into the Trade Gx business will enable it to enhance coverage in acute/sub –chronic therapies. While this may dilute the margin, it will allow the company to expand its growth horizons. "The overall outlook for all key markets (ex -US) remains healthy as we expect Torrent to outperform the industry growth," the brokerage firm said in result update.

According to ICICI Securities, the company continues to impress thanks to thoughtful capital allocation and robust margin profile, which can be attributed to a global portfolio that comprises around 60 per cent branded generics. "The company’s portfolio is finely balanced between India, Brazil, Germany and the US with India being the leader. With consistent FCF generation and moderation in core capex, we expect the leverage situation to improve substantially," the brokerage firm said in a note.