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Informist, Thursday, Jan. 16, 2025

By Sunil Raghu

 

AHMEDABAD – Strong growth in the domestic formulations business and steady to better growth in German and US markets could see drug manufacturer Torrent Pharmaceuticals Ltd. report a strong on-year growth in its key earnings metrics for the December quarter.

 

The company's consolidated net profit for the December quarter is expected to grow 15% on year to INR 5.1 billion, according to the average of estimates of eight brokerages. The Ahmedabad-headquartered company's net sales too are expected to rise nearly 9% on year to INR 29.8 billion, according to the average of estimates. On a sequential basis, the bottom line is seen rising 12.5%, while the top line is seen rising 3.1%.

 

Torrent Pharma, the flagship company of the Torrent group, is set to announce its Oct-Dec earnings on Jan. 24. For the same quarter last year, the company had reported a consolidated net profit of INR 4.4 billion, while revenue was INR 27.3 billion.

 

Brokerage estimates for Torrent Pharma's consolidated net profit are in the range of INR 4.9 billion to INR 5.2 billion, with Nirmal Bang Equities Pvt. Ltd.'s estimates at the lower end of the band and Kotak Institutional Equities at the higher end. As for net sales, estimates are in the range of INR 29.3 billion to INR 30.3 billion. The estimate by Motilal Oswal was the lowest and that by Kotak Institutional Equities the highest.

 

KEY MARKETS

 

The domestic business is seen achieving robust growth in the December quarter, driven by strong traction in its key therapies in the cardiovascular and gastro-intestinal areas. Torrent Pharma's domestic formulations business is expected to grow 13% on year in the December quarter, according to HDFC Securities Ltd., Kotak Institutional Equities, Motilal Oswal Financial Services and Nirmal Bang Equities Pvt. Ltd.

 

Motilal Oswal believes the company's domestic formulations business will grow to INR 16 billion due to strong traction in key therapies such as the cardiovascular, gastro-intestinal, and anti-diabetic segments. Torrent Pharma derives nearly three-fourths of its revenue in India from chronic and sub-chronic therapies.

 

Across global markets Torrent Pharmaceuticals operates in, the brokerages hold mixed views about sales growth in the US, a key market. While HDFC Securities Ltd. and Nuvama Wealth Management Ltd. see Torrent Pharma's US sales steady with no surprises, Nirmal Bang Equities expects it to remain muted. Motilal Oswal too expects Torrent Pharma's US sales to decline 6.1% on year to $31 million due to the slower ramp-up of the Dahej facility and a slower filing pace in the US. However, Kotak Institutional Equities sees Torrent Pharma's US sales at $37 million, a jump of 12% on quarter.

 

Similarly, HDFC Securities and Nuvama expect Torrent Pharma's business in Germany to be stable on-year in the latest quarter, while Kotak and Nirmal Bang expect a 9% and 8% on-year growth, respectively, for Torrent Pharma from the European Union, driven by a pick-up in the tender business.

 

As for the business from Brazil, HDFC Securities and Nirmal Bang expect steady on-year revenue growth for Torrent Pharma, but Nuvama and Kotak see depreciation of the Brazilian real leading to a fall in revenue from the country.

 

EXPANDING MARGINS

The company's earnings before interest, taxes, depreciation, and amortisation margin in the December quarter is expected to expand on year, according to most brokerages. Steady costs owing to cost rationalisation done at the start of 2022-23 (Apr-Mar) and higher gross margins could drive on-year expansion in the EBITDA margin, according to Nirmal Bang and HDFC Securities. Kotak Institutional Equities, on its part, sees Torrent Pharma's EBITDA margin expand 100 basis points on-year to 32.8%, while Nuvama expects EBITDA margin to sustain at 32%.

 

The estimates by eight brokerage houses for the company's EBITDA for the December quarter are in the range of INR 9.5 billion to INR 9.9 billion, with the average at INR 9.7 billion.

 

Motilal Oswal, on its part, is also keen on getting an update on the traction of branded generic markets in newer geographies, on filing and approval of new products in the US market, and remediation of the Indrad plant in Gujarat. It also wants to know more about the progress on the over-the-counter, or OTC, portfolio expansion and about further investment to aid growth in the India business.

 

At 0935 IST, shares of Torrent Pharmaceuticals traded 0.5% lower at INR 3,197.10 the National Stock Exchange.

 

Following are the Oct-Dec earnings estimates for Torrent Pharmaceuticals based on reports from nine brokerage firms in the descending order by the estimate of net profit:

 

Brokerages	Net Sales	Net Profit	EBITDA
Kotak Institutional Equities	30,272.00	5,242.00	9,928.00
Nuvama Wealth Management Ltd	29,852.00	5,207.00	9,510.00
Prabhudas Lilladher Pvt Ltd	29,940.00	5,165.00	9,785.00
Sharekhan Ltd	29,500.00	5,100.00	--
JM Financial Institutional Securities Pvt Ltd	29,422.00	5.079.00	9,626.00
HDFC Securities Ltd	29,822.00	5,063.00	9,603.00
Motilal Oswal Financial Services Ltd	29,317.00	5,024.00	9,616.00
Nirmal Bang Equities Pvt Ltd	30,069.00	4,871.00	9,622.00
Average	29,774.50	5,093.88	9,670.00

 

End

 

US$1 = INR 86.47

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Tanima Banerjee

 

 

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