Torrent Pharma leaps 10%, nears 52-wk high as Q1 net profit jumps 49% YoY

In terms of markets, while its India revenues grew marginally by 2% on a year-on-year (YoY) basis to Rs 925 crore, up from Rs 907 crore in Q1 of FY20, its US revenues fell by 1% to Rs 373 crore

Shares of Torrent Pharma rallied as much as 9.7 per cent to Rs 2,675.35 on the BSE on Friday after the pharmaceutical company's consolidated profit before tax jumped 44 per cent to Rs 402 crore in April-June quarter of FY21 (Q1FY21). The company's PBT in corresponding quarter last year stood at Rs 279 crore. The stock was trading close to its 52-week high level of Rs 2,679.45, touched on April 9, 2020.

Moreover, its consolidated net profit leaped 48.61 per cent to Rs 321 crore in the recently concluded quarter mainly on account of robust sales in the Indian market. The company had posted a net profit of Rs 216 crore for the corresponding period of the previous fiscal, Torrent Pharmaceuticals said in a BSE filing.

According to Samir Mehta, executive chairman, Torrent Pharma, the first quarter of current fiscal witnessed challenges due to Covid-19 hampering industry growth in global markets. However, most of the company's focus markets have seen a steady recovery since June.

"In India, despite a challenging market environment, Torrent was able to sustain its base revenue of the previous year with the chronic and sub‐chronic portfolio gaining market share. Expenses were lower during the quarter owing to the lockdown which aided margins. We remain optimistic about a gradual recovery in India, Brazil, US and Germany in the coming quarters," Mehta commented on the results. READ HERE

"We expect India business growth to recover from 2QFY21. Management expects TRP to continue to outperform IPM growth. US business (impacted by lack of new launches) should recover from 2HFY21 led by commercialization of approved products from Levittown (expected in 3QFY20) and resolution of compliance issues at Dahej and Indrad. Germany business growth (impacted by quality control issues) should normalize post Sep 2020. In Brazil, while FY21 growth should remain weak due to Covid impact and currency depreciation, management expects strong growth in FY22 led by new product launches. Overall, we estimate revenue/EBITDA CAGR of 11 per cent/ 15 per cent in FY20-22E," said analysts at Spark Capital. They have 'Add' rating on the stock with one-year target price of Rs 2,453.

That apart, the company's consolidated total income rose marginally by 0.88 per cent to Rs 2,060 crore from Rs 2,042 crore in Q1 of FY20. In terms of markets, while its India revenues grew marginally by two per cent on a year-on-year (YoY) basis to Rs 925 crore, up from Rs 907 crore in Q1 of FY20, its US revenues fell by one per cent to stand at Rs 373 crore in the said quarter as against Rs 376 crore in Q1 of previous fiscal.
 

"During the quarter, the company launched two products in the US market and guided for 9-10 more in FY21. It plans to file 12-14 ANDA in FY21. The company has completed CAPA for Indrad & Dahej facilities and submitted to the US FDA. As for the Levittown facility, TRP expects to complete remediation and start production by Q3-Q4. TRP guides for high single-digit to low double-digit growth in Europe and expects 97% of the business to normalize by September-end. It also guided for 3-4 launches in the Brazil market, which will drive growth. Growth in the RoW markets was broad-based and has seen some bit of stocking," said analysts at ELara Capital in a results review note. 

The brokerage remain cautious on the stock given that Torrent Pharma generates around 63 per cent of its revenue from branded generics, which could face challenges in the near term due to weak currency.

"The recovery in US sales would be gradual and hinge on faster resolution of Indrad & Dahej facilities. Double-digit growth in the domestic business is the key for premium valuation to sustain," they added. They have 'Sell' Rating on the stock with a target price of Rs 2,275 on 25x FY22E P/E.

At 9:48 am, the stock was trading nearly 9 per cent higher at Rs 2,655 on the BSE, as against a 126 points, or 0.33 per cent, rise in the benchmark S&P BSE Sensex at 37,862 level. A combined 1.7 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.