Shares of Torrent Pharmaceuticals Ltd climbed 3% in Wednesday's (October 25) trade after the multinational pharmaceutical company delivered in-line September quarter (Q2FY24) financial performance. The pharma company's India business was impressive, Brazil grew in double-digits. This was partially offset by subdued show in US generics.
Brokerages including Motilal Oswal Financial Services, Nuvama Institutional Equities, HSBC, Nomura and Goldman Sachs have baked in expectations of a strong growth trajectory, especially for Torrent's core branded generics business in the domestic and Brazil markets.
| Brokerages | Rating | TP |
| Nomura | Buy | ₹2,156 |
| HSBC | Buy | ₹2,200 |
| Jefferies | Hold | ₹2,040 |
| GS | Buy | ₹2,325 |
| Nuvama | Buy | ₹2,410 |
| Motilal Oswal | Buy | ₹2,050 |
"Torrent Pharma remains on track for superior execution in the branded generics market (DF and Brazil). It is further scaling up additional levers of growth (trade generics and consumer healthcare) in India," Motilal said in a note.
With new launches and increased field force, the pharma company is well-positioned to sustain growth momentum in Brazil. While US generics base business continues to witness price erosion, Motila said that new approvals would drive growth prospects.
Considering these factors, the brokerage expects 14%, 19%, and 34% sales, EBITDA, and profit after tax compounded over FY23-25 to Rs 12,400 crore, ₹4,000 crore, ₹2,200 crore, respectively.
"We maintain our Neutral rating due to limited upside potential from the current levels," Motilal said with a target price of ₹2,050 per share.
The brokerage has reduced its FY24 earnings estimate by 4% to factor in higher interest cost and moderation in US generics business. However, it has maintained its earnings estimates for FY25.
"We welcome management’s initiatives to continuously optimise the cost structure as evident in foregoing the low-margin US business. Price erosion in the US seems to be stabilising and with tender wins in the EU, these businesses are unlikely to be a drag on Torrent Pharma," Nuvama said.
HSBC, meanwhile, remains positive on Torrent Pharma's structurally strong business profile. The global brokerage has reiterated its positive stance on the drugmaker, maintaining its 'Buy' rating on the stock, with a target of ₹2,200.
Goldman Sachs has attributed the strong growth in the drug maker's core markets for its beat on profitability. Keeping its long-term positive outlook intact, GS has a 'buy' call on the counter with a target of ₹2,325.
According to Nomura, Torrent Pharma's second quarter earnings were marginally below estimates, but strong India growth remained a positive. The brokerage said the the company's earnings were impacted by higher costs and lower US revenues.
Torrent Pharma shares were trading 2.39% higher at ₹1,922.20 apiece on the NSE today. The scrip has gained 24% since the beginning of this year.
First Published: Oct 25, 2023 11:57 AM IST
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