Hold Torrent Pharmaceuticals; target of Rs 1333: Edelweiss

Edelweiss’ research report on Torrent Pharmaceuticals

Torrent Pharmaceuticals (TRP) Q4FY18 numbers were weak, with top line up 22%, on Unichem acquisition, and bottom line up 11%, on one-time reversal of deferred tax liability. Excluding Unichem, domestic sales grew 11%, implying that Unichem contributed ~INR1.7bn to top-line in Q4FY18. In the US, acquisitions offset sustained pricing pressure. In Brazil, which is currently in the midst of strikes and an impending election, TRP was allowed to take negligible price increases. Going forward, to make the Unichem acquisition earnings accretive by FY20, TRP needs to: i) arrest the decline in Unichem portfolio; ii) improve MR productivity; and iii) improve EBITDA margin from current levels of ~18%.

Outlook
We believe the stock is fairly valued at current levels of 21.3x FY20E earnings, a 14% premium to the sector. Maintain HOLD with TP of INR1,333.

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First Published on Jun 12, 2018 02:43 pm

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