Torrent Pharma - Best bet for the Medium Term

Torrent Pharmaceuticals Ltd. is the flagship company of the Torrent Group. Based in Ahmedabad, it was promoted by U. N. Mehta initially as Trinity Laboratories Ltd. and was later renamed to its current name Torrent Pharmaceuticals Ltd.

Torrent Pharmaceuticals operates in more than 50 countries with over 1000 product registrations globally.

Moreover, it has 7 fully owned subsidiares:

Heumann Pharma GmbH & Co Generica KG,
Torrent Pharma GmbH,
Torrent do Brasil Ltda.,
ZAO Torrent Pharma,
Torrent Pharma Inc.,
Torrent Pharma Philippines Inc.,
Torrent Pharma Canada Inc.,

Torrent Pharmaceuticals acquired Heumann GmbH, a Pfizer group company in 2005.
Operations

The company's key areas are Formulations, API, Drug Discovery, Marketing and Sales of Drugs. Its operations locations are:
Manufacturing plant at Chhatral, Near Kadi, in North of
Manufacturing plant at Indrad, Mehesna, Gujarat
Manufacturing plant at Baddi,
Manufacturing plant at
Manufacturing plant at Dahej, Gujarat (under progress)
Research Centre, Ahmedabad-Gandhinagar region, GujaratCorporate Office, beside sales India, off Ashram Road, [Ahmedabad]- Gujarat

Exports business remains in sweet spot

The exports business (~65% of the total turnover) is witnessing strong traction, especially from the US even as Brazil is slowing down due to structural issues. Other export markets such as Europe and RoW are growing at a steady pace. In the US, the company owns a healthy product pipeline (70 filed ANDAs, 48 approvals and 38 launches). We expect US sales to grow at a CAGR of 20% in FY14-16E to | 1125 crore. Similarly RoW and European sales are likely to grow at a CAGR of 18% and 13% to | 528 crore and | 1181 crore, respectively, during FY14-16E.

Indian formulations growth steady


Despite having a higher proportion of chronic therapies (65%) the company remains an underachiever in the branded formulations space, growing at a CAGR of 13% in FY09-14. The acquisition of Elder Pharma’s branded portfolio is likely to add new therapies such as neutraceuticals and gynaecology and to fill the portfolio gaps. We expect Indian branded formulations to grow at a CAGR of 27% in FY14-16E to | 1904 crore.


Conclusion

Going ahead, the new filings and approvals in the US will be keenly watched for multiple upgradation. The company, however, keeps on working on other important aspects such as improvements on the cost front via savings in selling and other expenses and Q1 numbers were testimony to this. the margins were healthy. We have also witnessed a turnaround in Brazil and this seems sustainable. In India, consolidation of Elder’s portfolio and growth from its own legacy products is likely to sustain growth momentum. The company remains well poised to deliver well rounded growth with geographies such as the US, EU and RoW joining traditional growth geographies such as India and Brazil.


CMP around Rs.1600


We have maintained a target price of | 2045 in the medium Term

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