27 May 2012

Torrent Pharmaceuticals: Hold Target : | 606 :ICICI Securities, PDF link


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http://content.icicidirect.com/mailimages/ICICIdirect_TorrentPharma_Q4FY12.pdf


E x p o r t s   g r o w i n g ,   f o r m ul a t i o n s   s t r u g g l i n g …
Torrent’s Pharmaceutical’s Q4FY12 numbers were disappointing on the
profitability front. While revenues registered healthy growth of 32% YoY
to | 674 crore (I-direct estimate- | 620 crore) driven by strong growth in
exports, EBITDA margins at 13% were way below I-direct estimate of
19%. The margins were compressed on account of a lot of recurring/nonrecurring events. The company reported a loss at the PAT level on
account of one-time provision of | 65 crore for estimated future sales
returns from the market. Adjusted for this one-time impact, PAT grew
22% to | 52 crore, way below I-direct estimate of | 78 crore on account of
compressed EBITDA margins. We maintain our HOLD rating as the
concerns on tepid formulations growth have increased further on account
of pricing pressure.
ƒ Exports, CRAMS steer overall growth
Exports grew 47% YoY to | 392 crore driven by growth in Brazil
(58% YoY), US (313%) and Europe ex-Heumann (43%). Germany
based Heumann, however, registered flat 4% growth. Growth in
exports was on account of rupee depreciation, new product
launches in key geographies and also on account of lower base of
Q4FY11. The CRAMS segment grew 25% YoY on the back of
improved order offtake from Novo Nordisk.
ƒ Domestic Formulations continue to reel under pressure
Domestic formulations grew by just 11% YoY. The growth was
below industry growth for the fifth consecutive quarter. The lower
growth was on account of overall pricing pressure across therapies
and lower volume growth in acute therapies.
[[[
V a l u a t i o n
We expect revenues, EBITDA and net profit to grow at a CAGR of 14%,
15% and 23%, respectively, in FY12-14E. Favourable currency and new
product launches in international markets will drive overall revenues.
However, EBITDA margins are expected to remain under pressure on
account of pricing issues, lapsing DEPB benefits and stretched learning
curve for new MRs in domestic formulations. We have valued the stock at
| 606 i.e. 12x FY14E EPS of | 50.5. We maintain HOLD.

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