Buy This Multibagger Large Cap Pharma Stock, Target Price Rs 1,724: Anand Rathi

Anand Rathi, a leading brokerage firm, has given a "buy" rating to for a target price of Rs 1,724 apiece. Torrent Pharmaceuticals is a large cap pharmaceuticals company. It has a market capitalization of Rs 52.316.90 crore.

Torrent Pharma, the flagship Company of Torrent Group is one of the leading pharma companies in India. The Company was a pioneer in initiating the concept of niche marketing in India and today is ranked amongst the leaders in the therapeutic segment of gastro-intestinal (GI), central nervous system (CNS), cardiovascular (CV), and women healthcare (WHC).

Stock Outlook, Returns, & Potential Gains

The current market price (CMP) of the stock stood at Rs 1,545.80 apiece on NSE after rising 3.59% from its previous close. The stock hit the 52-week low at Rs 1,242.08 apiece in May 2022, and the 52 week high at Rs 1,649.25 apiece in December 2021, respectively.

The shares surged 0.53% in the past 1 week and 0.28% in the past 1 month, respectively. In the past 1 year, it gave 1.38% negative return. However, in the past 3 years, it gave 82.59% positive return. In the past years, it gave 151.16% multibagger return.

If the stock is purchased at the present market price, taking into account the brokerage's given target price, it might result in 12% gains.

Pricey Curatio acquisition; synergies to play out in FY25

One of the most expensive deals in domestic pharma, Torrent Pharma's acquisition of Curatio Healthcare for Rs20bn values it at 8.8x EV/sales. The deal will widen Torrent's reach among paediatricians and dermatologists (nearly 85% of its dermatology portfolio is cosmetic dermatology). The synergies from this deal should reflect in FY25, as well as the benefit from greater MR productivity and the expansion to the north and east zones. Interest costs and amortisation are expected to increase on the consummation of the deal (in a month).

Strong in cosmetic/paediatric derma therapies

Curatio is expected to clock Rs2.75bn revenue in FY23 (up 23% y/y) and 30% operating margins. With ~95% of its revenue coming from derma therapies, its top-3 brands, Tedibar, Atogla, Permite/Perlice (paediatric derma), generate over 50% of its sales.

Torrent to enjoy synergies from Curatio in the second year

Derma therapies now bring only 3% to Torrent. Curatio has a wide footprint among paediatricians and dermatologists; hence, cross-selling would be long-term beneficial. Synergies should reflect in FY25, as well as the benefit from greater MR productivity and the expansion to the north and east zones. Going by Torrent's past acquisitions, it turn around Unichem's MR productivity (prior to acquisition, Rs3m vs Torrent's Rs6m in FY18) and margin improvement (15- 20% vs Torrent's 22-25% in FY18).

Valuation

According to the brokerage, "At the CMP of Rs1,495 the stock trades at 16.6x FY24e EV/EBITDA. We maintain a Buy rating on it, with an unchanged target price of Rs1,724 (19x FY24e EV/EBITDA)."

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.