Buy This Large Cap Pharma Stock For Potential Gains Of More Than 20%: Prabhudas Lilladher

The latest report of Prabhudas Lilladher, a leading brokerage firm, has given a buy call to a large-cap stock from the pharmaceuticals sector. The brokerage firm is highly bullish on Torrent Pharmaceuticals Ltd and has given the stock a target price of Rs. 1,850.

The price of Torrent pharma is in a consolidation zone in the larger time frame; the stock has been giving movements in the zone for the past few weeks after strong upside momentum. In the shorter term, the stock has given a strong upside moment, and the latest report of Prabhudas Lilladher suggests the stock can surge more than 20% from the current market price.

Outlook of Torrent Pharmaceuticals (TRP) Ltd.

Torrent Pharmaceuticals Ltd is one of the leading large-cap companies in the pharma sector. The company is Torrent Group's flagship in the city gas distribution and power industries. Torrent Pharmaceuticals mainly develops, researches, manufactures and markets generic pharmaceuticals formulations.

The stock is currently trading at the market price of Rs. 1,487, and the company has a market capitalization of Rs. 50 332 Crores. The 52-week high price of the stock is Rs. 1,652, and the 52-week low price is Rs. 1,242.

Buy Call Of Prabhudas Lilladher On Torrent Pharma

As mentioned in the latest report of 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. Post factoring in Curatio acquisition, our EPS for FY23 and FY24 stands reduced by ~5%. However, the deal is a strategic fit for TRP, given that it gives presence in high growing cosmetic derma segment and can enhance profitability of Curatio portfolio with cost synergies, geographical expansion and price hike as well as accelerate the topline growth. 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. Maintain 'BUY' rating with revised TP of Rs 1,850/share (Rs1,750 earlier), 17x EV/EBITDA as we roll forward to Sept 2024E."

Highlights Of Prabhudas Lilladher Report On Torrent Pharma

The main highlight of the report is the acquisition of the Curatio company by Torrent Pharmaceuticals. As the headline summarizes Prabhudas Lilladher's "Curatio acquisition; strengthening its domestic formulation business, " the company has entered a definitive agreement to acquire a 100% stake in Curatio Healthcare (Curatio).

Here is the revenue breakdown of Curatio Healthcare, "Curatio's 84% of revenue comes from high growth cosmetic dermatology. Curatio reported revenue of Rs2.3bn FY22 and is expected to be at Rs 2.75bn in FY23. Currently, Curatio enjoys 26-27% OPM. The acquisition cost is at 7x sales and ~23x EV/EBITDA on an FY23E basis. However, given the growth profile and scalability margins, the acquisition cost is 12x EV/EBITDA on FY25E. Management expects margins to scale up in coming quarters aided by geographical expansion and price hike in key brands like Tedibar along with cost synergies," says the latest report of Prabhudas Lilladher.