Torrent Pharma Q1 Review: Citi Hikes Target Price — Here’s Why

Citi Research has increased the price target for Torrent Pharmaceuticals Ltd. to Rs 4,380 from Rs 4,000, citing a healthy and in-line quarter and solid traction across the markets. The brokerage maintains a ‘buy’ rating for the firm.

Torrent Pharma’s India Sales Growth

Torrent Pharma’s India sales grew 11% year-on-year, led by outperformance in the focused therapies as its chronic sales grew 13% in Q1 vs 9% growth in chronic therapies of IPM, as per AIOCD. This growth is attributed to the company’s strategic focus on chronic therapies, which has enabled it to capitalize on the growing demand for these products in the Indian market.

Brazil and US Sales Growth

The company’s Brazil CC growth stood at 16% year-on-year, and as per IQVIA, Torrent grew 14% vs 5% growth in the market. US sales at US$36 million were up 16% year-on-year (on a low base) while Germany sales were largely flat (in CC) at EUR32 million due to supply disruption at a third-party supplier.

Citi’s View on Torrent Pharma

The brokerage has raised the target price by rolling forward the target multiple to Mar’27E EPS. Citi maintains its ‘buy’ rating on the stock as the underlying trends are healthy in the core markets while in the generics, too, the brokerage expects improvement in revenues trends and profitability as the facilities have been cleared by the US FDA.

The research firm highlighted that the company’s adjusted Ebitda margin stood at 32.9% – a minimum level of margins in the coming quarters. Citi believes that the margin expansion trend will continue on the back of operating leverage in the branded segments and potential recovery in the US.

Investments in the branded segments bode well for the growth outlook as well as capital allocation perspective while the potential operating leverage provides comfort on margin expansion.

Key Takeaways

Here are the key takeaways from Citi’s report:

• Torrent Pharma’s India sales grew 11% year-on-year.
• The company’s Brazil CC growth stood at 16% year-on-year.
• US sales grew 16% year-on-year.
• Citi maintains its ‘buy’ rating on the stock.
• The brokerage expects improvement in revenues trends and profitability in the generics segment.
• Citi believes that the margin expansion trend will continue on the back of operating leverage in the branded segments and potential recovery in the US.

Conclusion

Torrent Pharma’s latest quarterly results demonstrate the company’s ability to deliver strong performance across its key markets. The increase in Citi’s target price and maintenance of its ‘buy’ rating on the stock reflect the brokerage’s confidence in the company’s growth prospects. With its strong presence in the Indian and Brazilian markets and growing presence in the US, Torrent Pharma is well-positioned to continue delivering strong results in the future.