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Company Report
Torrent Pharmaceuticals Ltd.
CMP
Rs.1599.00
Target Price
Rs.1960.00
BSE Code
500420
Market Cap (Rs Cr.)
27055.08
52 Week High/Low
1622.00/742.55
Industry
Pharmaceuticals
Face Value
Rs.5.00
Shares O/S
16.92 Cr.
EPS(TTM)
55.78
Book Value
173.71
P/E
28.67
P/B
9.20
17th August, 2015
BUY

Torrent Pharma is among the top 15 companies in Indian pharma
market with strong presence in CV/CNS/VMN/GI market.
Torrent continues to be at the forefront of the Indian
pharmaceutical industry with many of its products ranking
among the top 500 brands (AIOCD Dataset).

The company has registered excellent results for the quarter
ending June 2015. The revenues from operations grew sharply by
about 75% to Rs.1947 crores vs. Rs.1114 cr. in the year ago quarter
while it grew ~69% q-o-q. The base business of branded Indian
generic market and generic-generic US market has remained
strong in the quarter. Operating profit climbed manifold at Rs.909
crores as against Rs.345 crores in the previous year quarter. The
EBIDTA margins have been higher mainly driven by strong
brands, niche products and improved field force productivity.
Further, it seems to continue on account of increasing focus on
USA market and strong traction in Elder’s portfolio. The adjusted
net profit stood at Rs.449 crore for the quarter as against Rs.256
crore; registering sharp growth of about 75%.

The exceptional growth in the revenues and profits is primarily
on account of launch of Aripiprazole in the USA market, which
currently has limited competition. The two largest brands of the
elder portfolio Shelcal and Chymoral continues to post strong
numbers. It contributed about 81% to the total Elder portfolio in
Q1FY16 as against 75% in the like quarter last year.

During the recent quarter ended, Torrent has completed the
acquisition of Zyg which drives it into the specialty area.
Shareholding Pattern
Valuation
Research Analyst: Vineeta Mahnot
research@hemonline.com
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With the robust product filings and launches thereof, strong market
presence across geographies, strong brands and new facility coming
up; Torrent pharma seems to be on a growth phase. We believe the
company is trading at an attractive valuation at 22.85x and 20.56x of
FY16EPS of Rs.69.97 and FY17EPS of Rs.77.79. We initiate a ‘BUY’ on
the stock with a target price of Rs.1960 (appreciation of about 23%)
with the medium to long term investment horizon.
1
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Business Details
Torrent Pharma, the flagship company of Torrent Group, is ranked amongst the top pharma companies of India. It is a
dominant player in the therapeutic areas of cardiovascular (CV) and central nervous system (CNS) and has achieved
significant presence in gastro-intestinal, diabetology, anti-infective and pain management segments. It has also
forayed into the therapeutic segments of nephrology and oncology while also strengthening its focus on gynecology
and pediatric segments. Torrent Pharma is the sole manufacturer of Insulin Formulations for Novo Nordisk in India
since the early ‘90s and has also set up a dedicated formulation and packaging facility for Insulin.
It is also amongst the few Indian pharma
majors to recognize the importance of research
and development in the post 2005 GATT era. Its
modern and well-equipped R&D Centre is
ranked amongst the best in the country and has
a team of highly qualified scientists working on
various Drug Discovery and Development
projects. The R&D Centre has been approved
by USFDA and various other regulatory
authorities. The Company's manufacturing
plants located at Indrad, Baddi & Sikkim have
facilities to produce Formulations and Bulk
drugs. The plants are approved by authorities
from various regulated and semi regulated markets like US, UK, Brazil, Germany, Australia and South Africa.
Recently, Torrent Pharma acquired the branded domestic formulations business of Elder Pharmaceuticals in India and
Nepal. The acquisition comprises a portfolio of 30 brands including market-leading brands in the Women's
Healthcare, Pain Management, Wound Care and Nutraceuticals therapeutic segments.
Torrent Pharma has a strong international presence spanning
over 40 countries with over 1200 product registrations. It has
wholly owned subsidiaries in USA, UK, Germany, Brazil,
Russia, Mexico, Philippines and other major markets. These
wholly owned subsidiaries spearheads the company’s entry
into several new regulated and semi regulated international
markets.
To sharpen its focus and enhance its customer reach in the
domestic market, Torrent operates through sales and
marketing divisions structured on specific Therapeutic areas.
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USA market-strong foothold
Torrent pharma is currently ranked eighth amongst generic
Indian companies in the US and in the covered market it
has a market share of about 10%. Further the company has
14 molecules and is ranked in the top three in the US. USA
has registered excellent growth of 231% in the quarter
ended June 2015 at Rs.888 crores from Rs.269 crores in
Q1FY15. Launch of g‐Abilify (aripiprazole) and higher
contribution thereof has resulted in the extremely good
performance during the quarter ended June 2015. gAbilify
is low competitive high volume product as there are only
five players in the market and that too with about 50% price
erosion. Further, the company aims a target of 15% market
share in the US market for its products. The company is also significantly ramping up its pipeline with products like
Ointments, Injectables, Specialty Oral solids (oncology). The Company has 49 ANDA approvals (including 5 tentative
approvals) and its pipeline consists of 19 pending approvals and 44 products under development. The company plans
to add 18-20 products per year from earlier 10-12 per year. It also aims to increase its presence in the new segments
like Dermatology, Oncology and Ophthalmology. The US business is expected to contribute to the growth of
international business in a significant way.
Domestic market-India
Torrent Pharma is now among the top 15 companies in
the domestic market and has 9 brands in top 500 brands
of the Indian Pharma market. The company ranks among
the top 5 in Cardiology & CNS therapies and among the
top 10 in Nutraceuticals and Gastrointestinal therapies.
The company clocked a sharp growth of 39% at Rs.491
crores in quarter ended June 2015 from Rs.353 crores in
the like quarter last year. The strong growth has been
primarily driven by the strong performance by the Elder
portfolio along with price hikes. Shelcal and Chymoralbrands of Elder portfolio continues to post strong
numbers. It contributed about 81% to the total Elder portfolio in Q1FY16 as against 75% in the like quarter last year.
The Company continues to focus on specialties and driving field force productivity through brand building in major
therapies, expanding portfolio in newly entered segments. Further, under the branded generics it has priorities in
India, Brazil and Philippines where it intend to scale up in CVD, CNS markets aiming for a stronger position and also
aims to enter new therapies in these markets. It aims for strengthening access in Dermatology, Gynaecology,
Oncology, Nephrology and Pain.
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Outperformance in Brazil
Among the Indian companies, in terms of market share,
Torrent ranks No. 1 in Brazil. Brazil is the largest
pharmaceutical market in Latin America and the 6th largest in
the world. The Company has a development basket of 28
products with 5 products in the Cardio Vascular (CV)
segment, 12 products in the Central Nervous System (CNS)
segment 8 products in the Oral Anti Diabetic/obesity (OAD)
segment and 3 products in other segments. There has been a
fall in the revenues in the quarter ended June 2015 at Rs.138
crores from Rs. 149 crores in Q1FY15. However, the
underlying business continues to perform very well, the
currency movements have been responsible for the reported
number essentially. Adjusted for the currency movement; Brazil operations has registered a growth of 20%. The
Company has a strong pipeline (products under development + under approval) of 48 products in the above therapies
to augment future growth. Despite negative GDP growth forecast, Torrent expects double digit growth in the volume
trends and remains to grow faster. The company has 20 products under approval out of which 2 products are expected
to be approved during the coming year in the Brazilian market.
Europe
Among the Generic players, Torrent holds the sixth position with a market share of 4.2% and is ranked No. 1 among
Indian players in the Germany Market. Operations in Europe registered revenue de-growth of 1% for Q1 FY 2015-16.
Adjusting for currency movements revenues grew by 16%.
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Improvement in productivity
The Company has achieved field force rationalization of
around 200 more filed force in the quarter ended June 2015.
So MR total strength currently is 3100 from 3300 in last
quarter and by the end of the year it is expected to stabilize at
3000. Rationalization has been 50% from the Elder and 50%
from across the therapies especially the acute segment. R&D
expenditure is expected to scale up significantly going ahead
while Tax rate would remain the same as in the financial year
ended March 2015.
Expansion and commissioning of manufacturing facilities
Torrent pharma’s new manufacturing facility at Dahej SEZ with a capacity of 14.5 billion tablets and 81 MT of API
would be one of the largest pharma manufacturing facilities in Indian at a single location. Once commissioned; it
would almost double the company’s existing capacity. The facility would cater to the key regulated markets like US
and Europe. The company is spending a 1000 crores capex for the same and has started the process of getting the
formulation plant approved by various regulatory authorities viz. USFDA, BfArM – Germany for International
markets. The facility is expected to commence commercial manufacturing in the third quarter of this fiscal year or
latest by the beginning of the fourth quarter. During the financial year ended March 2015, the company has initiated
an expansion of its current manufacturing facility at Sikkim. The additional capacities would be available within next
two years time. Further, as part of its portfolio diversification plans, the company is planning to enter critical care
therapy segment for international markets by establishing integrated manufacturing facility for drug substances and
drug products (API & formulations) in oncology. The plant is expected to become operational within next two years
time.
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Consolidated Profit & Loss Account
Rs. Crore
Particulars
Net sales
FY13
FY14
FY15
FY16E
FY17E
3211.14
4184.72
4653.45
6514.83
7114.19
30.32%
11.20%
40.00%
9.20%
Growth
Expenditure
2518.92
3233.24
3633.29
4860.06
5328.53
EBITDA
692.22
951.48
1020.16
1654.77
1785.66
Growth
37.45%
7.22%
62.21%
7.91%
21.56%
22.74%
21.92%
25.40%
25.10%
Other income
43.36
38.13
285.55
208.37
234.77
Depreciation & Amortisation
82.69
87.00
190.74
220.10
237.14
EBIT
652.89
902.61
1114.97
1643.04
1783.29
EBIT margin
20.33%
21.57%
23.96%
25.22%
25.07%
Interest
33.80
58.63
175.16
162.87
137.69
PBT
619.09
843.98
939.81
1480.17
1645.60
Tax
146.69
180.07
188.84
296.03
329.12
PAT
472.40
663.91
750.97
1184.13
1316.48
Share of Associates
0.00
0.00
0.00
0.00
0.00
Minority Interest
2.15
0.03
0.03
0.00
0.00
470.25
663.88
750.94
1184.13
1316.48
41.18
13.11
57.69
11.18
EBITDA margin
Adjusted PAT
Growth
Net Profit margins
14.64
15.86
16.14
18.18
18.51
Exceptional item
37.49
0.00
0.00
0.00
0.00
Reported PAT
432.76
663.88
750.94
1184.13
1316.48
Equity Capital
42.31
84.62
84.62
84.62
84.62
Equity Shares
8.46
16.92
16.92
16.92
16.92
Adjusted EPS
55.57
39.23
44.37
69.97
77.79
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Balance Sheet
Rs. Crore
Particulars
FY13
FY14
FY15
FY16E
FY17E
Equity Share Capital
42.31
84.62
84.62
84.62
84.62
Reserves & Surplus
1379.62
1817.81
2405.94
3,378.52
4,466.53
Shareholders’ funds
1421.93
1902.43
2490.56
3463.14
4551.15
Borrowings
692.97
1131.76
2740.35
2505.70
2294.90
Deferred tax liability
25.75
(18.16)
104.70
104.70
104.70
Minority Interest
0.37
0.40
0.43
0.43
0.43
Sources of funds
2141.02
3016.43
5336.04
6073.97
6951.18
Gross block
1,278.15
1,420.04
3,542.93
4401.91
4742.80
Accumulated Depreciation
458.33
544.70
710.27
930.37
1,167.51
Net block
819.82
875.34
2832.66
3471.54
3575.29
Capital WIP
285.28
534.11
678.33
581.95
758.85
Investments
60.47
185.66
297.65
303.73
393.45
Inventories
923.86
1,006.06
1,067.17
1,176.63
1,434.22
Sundry debtors
687.82
1,099.42
1,594.54
1,699.58
2,071.65
Cash and bank balance
626.97
769.42
567.36
610.11
743.67
Other current assets
209.75
319.74
473.22
501.16
610.87
Loans and advances
138.79
214.42
316.01
370.42
451.51
Total current assets
Current liabilities and
provisions
2587.19
3409.06
4018.30
4357.89
5311.93
1,611.74
1,987.74
2,490.90
2,641.15
3,088.33
975.45
1421.32
1527.40
1716.75
2223.60
0.00
0.00
0.00
0.00
0.00
2,141.02
3,016.43
5,336.04
6,073.97
6,951.18
Particulars
FY13
FY14
FY15
FY16E
FY17E
Return on Networth
33.07
34.90
30.15
34.19
28.93
Return on Capital employed
30.87
29.75
21.32
27.53
26.05
Debt/Equity
0.49
0.59
1.10
0.72
0.50
Asset turnover
0.86
0.84
0.59
0.75
0.71
Current Ratio
1.61
1.72
1.61
1.65
1.72
Net current assets
Misc exp
Uses of funds
Ratios
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Consolidated Quarterly Financial Highlights
Rs. Crore
Particulars
Q1FY16
Q1FY15
Q4FY15
YoY%
QoQ%
Revenues
1947
1114
1154
74.78
68.72
Expenditures
1038
769
992
34.98
4.64
Operating Profit
909
345
162
163.48
461.11
Adjusted Net Profit
449
256
130
75.39
245.38
OPM%
46.69
30.97
14.04
50.75
232.55
NPM %
23.06
22.98
11.27
0.35
104.61
Adjusted EPS*
26.41
15.06
7.65
75.39
245.23
*Adjusted for current no. of equity shares
Past Price movement of the stock
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Disclosure of Interest Statement
Company Name
1. Analyst Ownership of the Stock
No
2. Hem & its Group Company Ownership of the Stock
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3. Hem & its Group Companies’ Director Ownership of the Stock
Yes
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