Torrent Pharmaceuticals - Steady Quarter; Result Update Q3FY15 ::Edelweiss

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Torrent Pharmaceuticals’ (TRP) Q3FY15 adjusted PAT was ~6% below estimate, primarily due to adverse emerging market currency movement. Underlying business grew well, with international business growing 11% in constant currency and India growing 15% organically, with steady contribution from the Elder portfolio. While the outlook remains upbeat, we remain wary of the rich valuations (16x FY17E EPS).

Key highlights

(a) Elder brands: Sales were down to INR850mn versus INR950mn sequentially; adjusted for channel filling last quarter, sales were equal to last quarter; (b) US: 1 ANDA filed during the quarter (19 pending). Management expects 9-11 launches in FY16, and to file >10 ANDAs; (c) Abilify: Decision to launch at-risk will be taken closer to April’15; expect Nexium launch around mid-2015 and Detrol XR launch in H1CY15; (d) Brazil: Products where price reduction was taken witnessed market share growth.

Expect India business to outperform strongly in medium term

Multiple steps have been undertaken to derive synergies (field force, products, etc.) from the acquired Elder portfolio, which we believe will drive India growth. Trends for the Elder brands remain encouraging as both Shelcal and Chymoral posted 15%/37% growth sequentially. Full benefits of price hikes (mid-November) for the above brands will also be visible in ensuing quarters. Moreover, plans to increase number of launches in the Indian market will drive growth.

Enabling resolution for fund raising: Acquisition on the cards? 

TRP has moved to take shareholder approval for fund raising up to INR100bn (equity dilution: INR30bn; debt: INR75bn). Management’s acquisition focus remains on US/India/Brazil, which are also the three key markets of TRP’s growth strategy. While the US pipeline looks interesting, only 19 ANDAs are pending approvals and we believe that an acquisition may be required on this front to drive long term growth. 

LINK
https://www.edelweiss.in/research/Torrent-Pharmaceuticals--Steady-Quarter;-Result-Update-Q3FY15/10005511.html