Buy This Largecap Pharma Stock For 18% Upside, India Business Records 13% YoY Growth: Prabhudas Lilladher

Torrent Pharmaceuticals reported its Q2 earnings report stating that its gross profit increased 7% to Rs. 1,650 crore in Q2 FY23 as against Rs. 1,542 crore posted in the year-ago quarter. The company's India revenue gained to Rs. 1,224 crore in Q2 FY23, with a 13% YoY growth. However, its consolidated net profit fell 1.3% to Rs. 312 crore. Leading brokerage firm Prabhudas Lilladher recommends investors to buy the stock of Torrent Pharmaceuticals.

Stock To Buy: Target Price

The Current Market Price (CMP) of Torrent Pharmaceuticals is around Rs. 1567. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 1850. This stock has the potential to give an 18.05% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 53,403 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1567
Target Price	Rs. 1850
Potential Upside	18.05%
52-week high share price	Rs. 1,649.25
52-week low share price	Rs. 1,242.08

Sales growth

TRP's Q2FY23 sales increased 7% YoY to Rs23bn; broadly in line with our estimate aided by higher Brazil and India sales. Domestic formulation grew strongly by 12.6% YoY. ROW market grew strongly by 9% YoY, while Germany sales were down 12.4% YoY. Brazil grew significantly by 18.6% YoY. US sales were also healthy to $37mn.

Stock Valuation

According to Prabhudas Lilladher, "Torrent Pharma's (TRP) has Rs. 70bn (75% of total sales; including Curatio) worth of highly profitable branded formulation sales spread across India, Brazil and RoW markets. In the near term, Curatio acquisition will increase TRP's net debt and we see this acquisition as EPS dilutive. Historically TRP have managed to integrate successfully Unichem and Elder acquisition which gives us comfort. We expect 18% EBITDA and 19% EPS CAGR over FY22-25E. We maintain our estimates and 'Buy' rating with a target price of Rs. 1,850/share, 17x EV/EBITDA to Sept 2024E."

EBIDTA growth

TRP reported EBIDTA of Rs. 6.8bn vs our estimate of Rs. 6.9bn. Adj OPM came in at 29.4% (flat QoQ). R&D cost came in at 5.3% of sales; flat YoY. GMs were up 40 bps QoQ to 71.6%. Other expenses came in at Rs. 5.8bn, up 4% QoQ. Staff cost was up by mere 1% YoY. Tax came in higher at 33%. Resultant reported PAT stood at Rs. 3.1bn; down 1% YoY vs our estimate of Rs. 3.4bn.

Domestic formulation market

As per AIOCD; growth in the domestic formulation was aided by 9% price hike, 6% volume growth and 4% new launches. The recent launch of Sitagliptin in July month has been scaling up well and company ranked first among new brands launched in July. TRP now has 12 brands with more than Rs1bn of sales. Trade generic contribution continue to be in range of 2-3%, the brokerage firm mentioned in the report.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.