Sharekhan Bets On This Large Cap Pharma Stock For 19% Potential Upside, Given 130% Returns In 5 Year

Stock Outlook & Performance

Torrent Pharmaceuticals Limited stock closed today at Rs 1,498.05/share after a dip of 0.79% from the previous close of Rs 1,506.05/share. Today it was opened at Rs 1,510.40/share. The shares of the company hit the 52-week low at Rs 1,242.08/share on 12th May 2022, and 52-weeks high at Rs 1,649.25/share on 21 December 2021, respectively.

It has moved up 0.98% in the last 1 week, and 8.64% in the last 1 month, respectively. In 1 year, the stock gained 0.91%. It has given good returns compared to the last 1 year. Its shares gained 97.7% in the last 3 years and 130.46% in the last 5 years, respectively. Its ROE is 13.05% and its PE ratio is 65.25%.

Considering the estimated target price of Rs 1,770 per share by the brokerage and the CMP of the stock, the stock of the company has a huge potential of 19% upside in 12 months.

Emphasis on the creation of sustainable and profitable growth across geographies

Torrent's annual report mentions about a strategic framework and theme, which are expected to drive the company's growth going ahead. Torrent has identified several objectives under its mission and vision, which would support the strategy of the company - that of long-term sustainable growth. The company has bifurcated the objectives into six strategic pillars, which provide a clear path to implement the growth strategy. Growth across geographies would be driven by achieving market share gains and expansion in existing therapy areas in core markets as well as in new markets.

Focus on new markets with a perspective to develop these into future growth engines

Torrent is investing in newer growth markets, in addition to the existing core markets. These would either be done by expanding the company's presence in existing markets or by tapping in new markets. Torrent looks to leverage its existing product pipeline to scale up and strengthen its presence in other existing growth markets, venture into new markets by pivoting the already-proven business model, and go-to-market strategies from existing markets. Overall, this would enable Torrent to develop these markets as future growth engines, though these seem to be medium to long-term strategies.

Efforts to improve quality, productivity, and cost competitiveness to drive operating performance

As part of the strategic initiative to improve cost competitiveness and improve operational performance, Torrent intends to focus on productivity enhancement and cost competitiveness across functions, ensure supply continuity, and optimise research and development (R&D) efficiency by building a market-centric portfolio. The above parameters would enable the company to improve its operating performance and drive its operational excellence.

Focus on achieving sustainable and profitable growth; Buy For Target Price of Rs 1,770

Torrent in its annual report has highlighted a strategy to create sustainable and profitable growth across geographies and therapy areas, which could support the company's growth over the medium to long term. Torrent sees a healthy outlook for India business, backed by expanding reach, market share gains, and likely traction in new trade generics division. Expected healthy growth in the existing portfolio, likely outperformance to the industry, and new product launches would drive Brazilian sales growth, while elevated cost pressures, price erosion, and delays in re-inspection for plants by USFDA could slow down US growth momentum. At the CMP, the stock trades at 32.9x/27.8x its FY2023E/FY2024E PE, respectively. Further, the stock price has corrected ~9% from its 52-week high and due to positive outlook for India and Brazil businesses, we re-iterate our Buy recommendation on the stock with an unchanged price target (PT) of Rs. 1,770.

Key Risks according to brokerage firm - 1. Delay in resolution of USFDA issues at its plants; and 2. Any adverse change in the regulatory landscape can impact earnings prospects.

Torrent Pharmaceuticals Limited

Torrent Pharma, the flagship Company of Torrent Group is one of the leading pharma companies of the Country. 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 cardiovascular (CV), central nervous system (CNS), gastrointestinal (GI) and women healthcare (WHC). The Company also has a significant presence in diabetology, pain management, gynaecology, oncology and anti-infective segments.

Torrent Pharma's competitive advantage stems from the world-class manufacturing facilities, advanced R & D capabilities, extensive domestic network and a widespread global presence in over 40 countries.