Torrent Pharma shares tumble 8% post December quarter results

While the outlook for its key geographies is expected to improve over the medium term, the current valuation largely captures the upside, analysts said

Shares of Torrent Pharmaceuticals dipped 8 per cent to Rs 2,545 on the BSE on Tuesday after the company reported its December quarter (Q3FY21) results, with flat consolidated revenue growth at Rs 1,995 crore, mainly due to 23.4 per cent year on year (YoY) decline in US formulations to Rs 292 crore.

The company said that the US sales was impacted by price erosion on base business & base impact of Sartan portfolio discontinuation. However, domestic revenues grew 7 per cent YoY at Rs 930 crore driven by market recovery, continued momentum in chronic brands & strong recovery in sub‐chronic brands, it said. Brazil de-grew 8.5 per cent YoY to Rs 173 crore. Germany business grew a robust 21.0 per cent YoY to Rs 265 crore.

Ebitda (earnings before interest, taxes, depreciation, and amortisation) increased 12 per cent YoY at Rs 607 crore, while margins expanded 296 bps YoY to 30.4 per cent mainly due to lower other expenses amid lower travel and promotional spends. Profit after tax jumped 18 per cent YoY to Rs 297 crore.

“Torrent Pharma’s Q3 results were mostly in line with I-direct estimates (albeit skewed) on all fronts. While growth in India and Germany was mostly offset by decline in the US and Brazil, overall profitability was higher YoY amid lower on-ground activities and a lower tax rate. Overhang pertaining to two US focused plants notwithstanding, Torrent continues to impress thanks to its robust margin profile that can be attributed to global portfolio that comprises around 65 per cent branded generics,” ICICI Securities said in a note.

With consistent free cash flow (FCF) generation, moderation in core capex, we expect the leverage situation to improve substantially, the brokerage firm said.

The recovery in the Domestic Formulation (DF) / Germany business was offset by decline in the US and currency headwinds in Brazil. Reduced opex kept profitability at elevated levels, according to analysts at Motilal Oswal Securities.

The brokerage firm reduce EPS estimates for FY21/FY22/FY23 by 4 per cent/8 per cent/6 per cent, factoring in an increase in operational expenses with the resumption of promotional activity by MRs in the DF segment and the lack of new approvals due to USFDA-imposed regulatory issues at Dahej/Indrad. While the outlook for its key geographies is expected to improve over the medium term, the current valuation largely captures the upside. Hence, we maintain a Neutral stance on the stock, it said.

At 12:48 pm, Torrent Pharma was trading 7 per cent lower at Rs 2,555 on the BSE, as compared to 0.7 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped an over 9-fold with a combined 1.75 million equity shares changing hands on the NSE and BSE.