Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Unplugging the Torrents!
Torrent pharma (TPL) has a unique hub-spoke business model wherein its expertise in chronic ailments - CVS
and CNS are centric to its growth mantra. It has successfully leveraged on its capabilities in these TAs and is
well penetrated in fast growing emerging markets (25% of FY11 sales). We anticipate sales from regulated
markets to register 25% growth over FY11-14E. The US generic market in particular is expected to see high
growth, aided by key generic launches (Zyprexa, Singulair ODT, Lexapro) and market share gains in existing
products. We anticipate domestic formulations to regain its lost ground and grow by 12% over FY11-14E. We
expect 19% earnings growth over the same period aided by non dilutive capex.
Investment Rationale
Domestic biz to grow on new launches and improving marketing efficiency
TPL is a well established player in the domestic market (ranked 18th) with
leadership position in select molecules and a dominative product portfolio in
CVS and CNS. The company’s exposure to slowing TAs - anti-infectives and GI
in particular has led to slowdown in growth momentum (YTD - 9% growth YoY
against FY09-11 CAGR of 16%). We estimate sales to pick up and grow by 12%
during FY11-14E as the management takes corrective measures to increase
doctor coverage and territorial reach supported by new launches.
Emerging markets to add stability
The company is among the leading Indian players present in Brazil (16% of
sales) which is the second-most profitable division for the company after India.
Revenue contribution from Brazil is expected to see healthy growth driven by
increased penetration and new launches (approx. 30 by FY15E). Torrent is also
present in Russia, CIS, Mexico and other Asia Pacific markets (collectively 9%
of sales) and is actively looking to tap newer markets like Thailand & Romania.
Supply-based arrangements with MNCs further add visibility to topline. We expect
the entire EM basket (25% of sales) to clock a 20% CAGR over FY11-14E.
US to drive growth in regulated markets
Torrent is among the few Indian companies to have successfully established a
stronghold in Germany (14% of sales). However, given the ongoing economic
slowdown and increasing pricing pressure, we expect revenue contribution from
European markets to see a stagnated growth over the next two years. This will
be compensated by increasing contribution from US where it has prepared to
genericize some marquee drugs over the next two years (Zyprexa, Singulair
ODT, Lexapro to name a few). Revenue from regulated markets (25% of sales)
is expected to grow 25% CAGR over FY11-14E.
Valuation
TPL’s tangible growth strategy is backended by its healthy cash flows supported
by efficient working capital management and low debt burden. At CMP the stock
trades at 15.0x and 13.7x FY12E and FY13E earnings estimates respectively.
We initiate coverage on Torrent Pharma with Accumulate recommendation and
a target price of ` 706 (13x FY14E EPS).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Unplugging the Torrents!
Torrent pharma (TPL) has a unique hub-spoke business model wherein its expertise in chronic ailments - CVS
and CNS are centric to its growth mantra. It has successfully leveraged on its capabilities in these TAs and is
well penetrated in fast growing emerging markets (25% of FY11 sales). We anticipate sales from regulated
markets to register 25% growth over FY11-14E. The US generic market in particular is expected to see high
growth, aided by key generic launches (Zyprexa, Singulair ODT, Lexapro) and market share gains in existing
products. We anticipate domestic formulations to regain its lost ground and grow by 12% over FY11-14E. We
expect 19% earnings growth over the same period aided by non dilutive capex.
Investment Rationale
Domestic biz to grow on new launches and improving marketing efficiency
TPL is a well established player in the domestic market (ranked 18th) with
leadership position in select molecules and a dominative product portfolio in
CVS and CNS. The company’s exposure to slowing TAs - anti-infectives and GI
in particular has led to slowdown in growth momentum (YTD - 9% growth YoY
against FY09-11 CAGR of 16%). We estimate sales to pick up and grow by 12%
during FY11-14E as the management takes corrective measures to increase
doctor coverage and territorial reach supported by new launches.
Emerging markets to add stability
The company is among the leading Indian players present in Brazil (16% of
sales) which is the second-most profitable division for the company after India.
Revenue contribution from Brazil is expected to see healthy growth driven by
increased penetration and new launches (approx. 30 by FY15E). Torrent is also
present in Russia, CIS, Mexico and other Asia Pacific markets (collectively 9%
of sales) and is actively looking to tap newer markets like Thailand & Romania.
Supply-based arrangements with MNCs further add visibility to topline. We expect
the entire EM basket (25% of sales) to clock a 20% CAGR over FY11-14E.
US to drive growth in regulated markets
Torrent is among the few Indian companies to have successfully established a
stronghold in Germany (14% of sales). However, given the ongoing economic
slowdown and increasing pricing pressure, we expect revenue contribution from
European markets to see a stagnated growth over the next two years. This will
be compensated by increasing contribution from US where it has prepared to
genericize some marquee drugs over the next two years (Zyprexa, Singulair
ODT, Lexapro to name a few). Revenue from regulated markets (25% of sales)
is expected to grow 25% CAGR over FY11-14E.
Valuation
TPL’s tangible growth strategy is backended by its healthy cash flows supported
by efficient working capital management and low debt burden. At CMP the stock
trades at 15.0x and 13.7x FY12E and FY13E earnings estimates respectively.
We initiate coverage on Torrent Pharma with Accumulate recommendation and
a target price of ` 706 (13x FY14E EPS).
No comments:
Post a Comment