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Strong domestic formulations growth over FY11-13
Torrent Pharma’s (TRP) domestic focus on the high growth chronic segment
(62% of domestic sales), with leading market share in CVS and CNS, imparts
higher growth than the industry. Moreover, with strong focus on brand building
and higher field force stability, the company is gaining strong traction in metros
and tier I cities, as per our survey. We expect its domestic business to post 18%
CAGR over FY11-13E after registering 16-17% growth in FY10-11, led by growth
in covered market and ramp-up of new divisions.
Field force expansion, new launches to boost margin from H2 FY12
The company has been in consolidation phase with significant investments over
the past 12-14 months, which has impacted its operating performance. EBITDA
margins declined 170 bps from 21.5% in FY10 to 19.8% in 9m FY11, while
earnings growth has been mute. We expect margin pressure to continue in
H1FY12 with commissioning of the Sikkim facility; however, margins are likely to
recover from H2FY11 as domestic field force ramp up and new launches in
Brazil/Mexico start attaining critical mass. We expect EBITDA margins to improve
100-120 bps over FY13E.
27% earnings CAGR over FY11-13E likely
We expect TRP’s earnings to post 27% CAGR over FY11-13E on back of
improvement in operating margins and robust revenue growth, as investments
start gaining traction. We estimate 19% revenue CAGR over FY11-13 driven by:
(a) strong growth in domestic business; (b) scaling up of Mexico; (c) new
product launches in Brazil and Europe; and (d) ramp-up in US generics (USD 60
mn in FY13E from USD 30 mn in FY11E). Moreover, TRP’s strategic tie ups (AZN)
for emerging markets will add further momentum to earnings.
Outlook and valuations: Positive upsides; maintain ’BUY’
TRP has set itself a goal of expanding into higher value branded generics
markets of India, Brazil, Mexico, and other emerging markets. Moreover, the
company has been consistently ramping up filings to establish a strong base in
US and Europe. We believe these investments should start gaining traction,
thereby contributing higher to overall growth and profits. We reiterate
‘BUY/Sector Outperformer’ recommendation/rating. Torrent offers higher
upside in our coverage universe.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong domestic formulations growth over FY11-13
Torrent Pharma’s (TRP) domestic focus on the high growth chronic segment
(62% of domestic sales), with leading market share in CVS and CNS, imparts
higher growth than the industry. Moreover, with strong focus on brand building
and higher field force stability, the company is gaining strong traction in metros
and tier I cities, as per our survey. We expect its domestic business to post 18%
CAGR over FY11-13E after registering 16-17% growth in FY10-11, led by growth
in covered market and ramp-up of new divisions.
Field force expansion, new launches to boost margin from H2 FY12
The company has been in consolidation phase with significant investments over
the past 12-14 months, which has impacted its operating performance. EBITDA
margins declined 170 bps from 21.5% in FY10 to 19.8% in 9m FY11, while
earnings growth has been mute. We expect margin pressure to continue in
H1FY12 with commissioning of the Sikkim facility; however, margins are likely to
recover from H2FY11 as domestic field force ramp up and new launches in
Brazil/Mexico start attaining critical mass. We expect EBITDA margins to improve
100-120 bps over FY13E.
27% earnings CAGR over FY11-13E likely
We expect TRP’s earnings to post 27% CAGR over FY11-13E on back of
improvement in operating margins and robust revenue growth, as investments
start gaining traction. We estimate 19% revenue CAGR over FY11-13 driven by:
(a) strong growth in domestic business; (b) scaling up of Mexico; (c) new
product launches in Brazil and Europe; and (d) ramp-up in US generics (USD 60
mn in FY13E from USD 30 mn in FY11E). Moreover, TRP’s strategic tie ups (AZN)
for emerging markets will add further momentum to earnings.
Outlook and valuations: Positive upsides; maintain ’BUY’
TRP has set itself a goal of expanding into higher value branded generics
markets of India, Brazil, Mexico, and other emerging markets. Moreover, the
company has been consistently ramping up filings to establish a strong base in
US and Europe. We believe these investments should start gaining traction,
thereby contributing higher to overall growth and profits. We reiterate
‘BUY/Sector Outperformer’ recommendation/rating. Torrent offers higher
upside in our coverage universe.
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