 "Torrent Pharma")
Torrent Pharmaceuticals (Torrent) reported revenue and earnings before interest, taxes, depreciation, and amortisation (Ebitda) that met consensus for the April-June quarter of the financial year 2025-26 (Q1FY26). But earnings were lower due to lower other income. Torrent had robust growth in Brazil in FY25 and the momentum carried on in Q1FY26.
But currency volatility hurt earnings. There’s also improved performance in the domestic formulation (DF) segment. Germany faces headwinds. New launches are expected to drive US generics business.
Sales grew 11.2 per cent year-on-year (Y-o-Y) to ₹3,180 crore. The domestic formulation revenue grew 10.8 per cent Y-o-Y to ₹1,810 crore (57 per cent of sales). US generics grew 19 per cent Y-o-Y to ₹310 crore (10 per cent of sales). Germany sales grew 8.5 per cent Y-o-Y to ₹310 crore (10 per cent of sales). In constant currency (CC) terms, sales were stable on a Y-o-Y basis.
The Brazil business grew 11.2 per cent Y-o-Y to ₹220 crore (7 per cent of sales). In CC terms, sales grew 16 per cent Y-o-Y. US generics sales grew 16 per cent in CC terms. Rest of World sales grew 10 per cent Y-o-Y at ₹530 crore (17 per cent of sales).
The gross margin was stable Y-o-Y at 75.6 per cent for Q1FY26. There was a one-time impact of ₹15 crore related to acquisition costs. Adjusted for the same, Ebitda margin expanded 60bp Y-o-Y to 32.9 per cent. Ebitda grew 13.3 per cent Y-o-Y to ₹1,050 crore. Adjusted profit after tax (PAT) grew 18.7 per cent Y-o-Y to ₹560 crore.
Torrent guided to maintain its FY26 Ebitda margin at Q1FY26 level. The company plans to add 800 medical representatives in FY26, bringing the total count to 7,000. The acquisition process for JB Chem is largely on track, with CCI approval awaited.
In Brazil, Torrent aims to launch 8-10 products annually. Another 10 launches are also planned for the US market, alongside the target of market share gains in existing products. Strict prescription guidelines for Ozempic are expected to keep off-label use in check in Brazil. Annual Ozempic sales in Brazil stand at around $150 million and have declined 14-15 per cent over the past year. Wegovy is tracking sales of $150 million per quarter. However, a generic version of this is expected only after a couple of years.
Revenue from Latin America grew a strong 18 per cent Y-o-Y in Brazilian currency, but the latter’s depreciation against INR dragged down rupee growth to 11 per cent Y-o-Y. Assuming currency volatility moderates, the LatAm business will contribute steadily. US revenue uptick came after five disappointing years and this pick up is guided to sustain. Clearance of the Dahej facility, and a pick-up at the Indrad facility should help.
The domestic business posted strong double-digit growth. Growth in the US has picked up pace. But currency depreciation continues to hurt growth in Brazil. Growth in the EU was hit by supply chain issues.
Analysts will have to build in JB Chem revenue and Ebitda estimates for FY27 and beyond after announcement of acquisition of a majority stake and this will add to growth momentum if integration goes well. Torrent management expects significant synergies. JB Chem is an efficiently run company with a good distribution network.
As of now, stock valuation is running at PE 53 times of expected FY26 earnings. To some extent, this can be justified by balance sheet deleveraging and reducing interest expense which will boost EPS going forward. But the high valuation and recent surge in price limits the upside.
According to Bloomberg, 17 of the 22 analysts polled post results (announced on Monday evening) are bullish, while one is bearish and the remaining four are neutral on the stock, which closed almost 4 per cent higher at ₹3,768.35 on the BSE. Their average one-year target price is ₹3,936.27.
