Staging for a Comeback
With the company addressing key concerns on the domestic formulations
front and better traction in US and Brazil, the company is all set to
achieve 18.9 % CAGR revenue growth for the period FY 12‐14E and an
earnings CAGR of 39 %, we upgrade our rating on the stock to BUY.
Domestic Formulations – Back on Track: The primary reason for the
underperformance can be attributed due to cluttering of brands in the antiinfective
and the pain management segment which led to inadequate
promotion of brands and hence the Company lost ground in these
segments. The company has recruited 200 additional MRs so as to impart
more focus. With the measures in place we believe the company would be
able to achieve the 12% and 14% growth factored by us for FY13E and
FY14E, respectively
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Brazil – Growth in line with Branded Generics Market: The Company
would launch minimum 3‐4 products every year for the next two years
across geographies. With addition of 50 MRs for FY 13, better detailing and
a 10% INR depreciation vis‐à‐vis the Brazilian Real, the company is
confident of growing by 15 % for FY 13E and FY 14E.
Reasonable Scale in the US Market: Torrent Pharma will continue to
launch 5‐6 products every year and will continue to follow a policy to sell
products which are profitable. The company has been able to secure sizable
market share in certain products. With 60‐70 % of the products fully
backward integrated, the company would be able to scale Rs 3.2 bn
revenues in FY 13E and Rs 4.6 bn revenues in FY14E respectively.
Outlook & Valuation
Torrent Pharma is among the few companies to have adopted accrual basis
for sales return and has provided additional R & D expenses on account of
the new GDUFA provisions for the pending ANDAs in Q4 FY 12. We
marginally upgrade our EPS for FY13E by 3.2% to Rs. 45.4, while we
maintain our FY14E EPS at Rs. 54.1. On account of price correction, we
upgrade the stock to “BUY” with a price target of Rs. 700 per share based
on 12.9xFY14E.
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