Earnings Outlook
Torrent Pharma consol PAT seen up on domestic, global sales
This story was originally published at 15:39 IST on 24 October 2024
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By Alina Geogy
MUMBAI – Drug manufacturer Torrent Pharmaceuticals Ltd. is expected to report a strong on-year growth in its key earnings metrics for the September quarter owing to strong growth in domestic as well as some international markets, such as Brazil and Germany. The company's consolidated net profit in Jul-Sept is expected to grow 26.7% on year to INR 4.89 billion, according to the average of estimates of 10 brokerages.
The Ahmedabad-headquartered company's net sales are expected to rise nearly 11% on year to INR 29.50 billion, according to the average of estimates. On a sequential basis, the bottom line is seen rising 7%, while the top line is seen rising 3.2%.
Torrent Pharma, the flagship company of the Torrent group, is set to announce its Jul-Sept earnings Friday. For Jul-Sept last year, the company had reported a consolidated net profit of INR 3.86 billion, while revenue was INR 26.60 billion.
Brokerage estimates for Torrent Pharma's consolidated net profit are in the range of INR 4.45 billion to INR 5.10 billion, with Elara Securities' estimate at the lower end of the band and Motilal Oswal Financial Services' at the higher end. As for the net sales, estimates are in the range of INR 28.93 billion to INR 30.03 billion. The estimate by Nuvama Wealth Management was the lowest, while that by Motilal Oswal was the highest.
KEY MARKETS
The domestic business is expected to clock a robust growth in the September quarter driven by strong traction in its key therapies, new product launches, and a recent in-licensing opportunity with Japanese drugmaker Takeda Pharmaceutical Co. Ltd., according to various brokerage firms. In early June, Torrent Pharmaceuticals announced it had signed a non-exclusive licencing agreement with Takeda Pharma to commercialise the gastro-intestinal drug Vonoprazan in India. As per the pact, Torrent Pharma will market the drug, which is used for disorders such as gastro-oesophageal reflux, under its trademark 'Kabvie'.
Torrent Pharma's domestic business is expected to grow 13% on year in the September quarter, according to Kotak Institutional Equities, HDFC Securities, Motilal Oswal Financial Services, and Nuvama Institutional Equities. Motilal Oswal believes the company’s domestic formulations business will grow due to strong traction in key therapies such as the cardiac, gastro, and anti-diabetic segments. Torrent Pharma derives around 75% of its revenue in India from chronic and sub-chronic therapies.
Nomura Global Markets Research expects domestic growth of around 11% on year for the quarter including the Curatio acquisition. High growth traction in the Curatio portfolio after its complete integration had supported the company's earnings in the June quarter too. In November 2022, the company acquired Curatio Healthcare Pvt. Ltd., which held a strong portfolio in cosmetic dermatology. Torrent Pharma is growing ahead of the broader market due to contributions from the chronic segment, a foray into consumer wellness and trade generics, and price increases, Nomura said.
There were mixed views about sales growth in the US, a key market for the company. Sales in the US are expected to decline 2.9% on year to $33 million for the quarter due to slower ramp-up of its manufacturing facility in Dahej, Gujarat, according to Motilal Oswal. The Dahej facility manufactures active pharmaceutical ingredients and formulations for Torrent Pharma's international markets.
Lower sales growth in the US is also anticipated due to one-offs in the previous quarter, YES Securities said. On other hand, Centrum Broking expects sales in the US to rise 6% on year, and Kotak sees a 6% sequential growth. HDFC Securities expects sales in the US to remain flat on quarter. The company’s business in Germany is expected to clock steady on-year growth in the quarter, led by its tender business in the country. Nuvama sees the business in Germany growing 9% on year, and Kotak expects a 13% on-year and a 6% on-quarter growth.
In Brazil, the company's revenue is expected to rebound as a spill-over of sales from the June quarter to the September quarter due to floods in the country, brokerages said. Southern Brazil experienced severe flooding due to heavy rains beginning late April. This was the country's worst flood in over 80 years.
However, depreciation of the Brazilian currency may drag the earnings down, they said. Despite the depreciation of the Brazilian real, Kotak expects sales to grow 31% on quarter and 2% on year on a low base in Brazil for Jul-Sept. Nomura believes sales growth in the country will be boosted by new drug launches.
MARGINS
The company's earnings before interest, taxes, depreciation, and amortisation margin in Jul-Sept are expected to expand on year, according to most brokerages. An increase in sales in international markets, price increases in branded markets, and cost tailwinds should drive on-year expansion in the EBITDA margin, Nomura said, while HDFC Securities expects higher gross margin and steady costs to push the margin up.
While Nomura expects EBITDA margin to improve by 150 basis points on year, Centrum Broking expects margin to expand by 160 bps on year, and Kotak Institutional Equities sees an on-year expansion of 100 bps. The estimates by nine brokerage houses for the company's EBITDA for the September quarter are in the range of INR 8.94 billion to INR 9.85 billion, with the average at INR 9.52 billion.
At 1327 IST, shares of Torrent Pharmaceuticals ended at INR 3,312.20, marginally lower from the previous close, on the National Stock Exchange.
Following are the Jul-Sept earnings estimates for Torrent Pharmaceuticals based on estimates compiled by Informist from 10 brokerage firms:
| Brokerages | Net Sales | Net Profit | EBITDA |
| Antique Stock Broking Ltd | 29,766.00 | 4,893.00 | 9,490.00 |
| Elara Securities (India) Pvt Ltd | 28,990.00 | 4,448.00 | 8,935.00 |
| HDFC Securities Ltd | 29,887.00 | 5,028.00 | 9,654.00 |
| Kotak Institutional Equities | 29,415.00 | 4,898.00 | 9,423.00 |
| Motilal Oswal Financial Services Ltd | 30,030.00 | 5,104.00 | 9,850.00 |
| Nomura Equity Research | 29,016.00 | 4,827.00 | 9,429.00 |
| Nuvama Wealth Management Ltd | 28,929.00 | 4,970.00 | 9,854.00 |
| Prabhudas Lilladher Pvt Ltd | 29,220.00 | 4,942.00 | 9,199.00 |
| Sharekhan Ltd | 29,790.00 | 5,060.00 | -- |
| YES Securities (India) Ltd | 29,927.00 | 4,742.00 | 9,825.00 |
| Average | 29,497.00 | 4,891.20 | 9,517.67 |
End
US$1 = INR 84.08
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Akul Nishant Akhoury
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