Torrent Pharma, flagship company of the Torrent Group, is ranked 6th in the Indian pharmaceuticals market in India. Torrent Pharma stock price has gained 25% over the past one year. The company has presence in the therapeutics segments of cardiovascular, gastro intestinal, central nervous system CNS, vitamins minerals nutritional (VMN) and cosmo-dermatology. It is a specialty-focused company with nearly 75% of its Indian revenues coming from chronic and sub-chronic therapies. With a strong acquisition history, Torrent Pharma has invoked strong investor interest recently as the company is rumored to be in talks with PE funds to acquire Cipla’s promoter stake. But even without it, Torrent Pharma has strong growth levers for the near future.
Steady Q1FY24, strong margin guidance
Torrent Pharma reported revenues of Rs 2,591 crore, rising 10.4% YoY in Q1FY24. Double-digit revenue growth was driven by India business which contributes more than 50% to its total revenue basket. India business grew 15% YoY in June Quarter 2023.
Operating margin was strong at 30.53% up 20 basis pointsYoY in Q1FY24. According to the management, operating margin performance was driven by price increases, better branded mix and cost efficiency measures taken since H2FY23. As the company derives 72-73% of its revenues from branded segment, price increases are easily taken in various markets by the company which supports strong margin performance. The management expects 75-100 basis points improvement YoY in FY25. Net profit came in at Rs 378 crore, up 7% YoY in June Quarter 2023.
India business performance robust, Curatio growth stable
Speaking on India business growth, Aman Mehta said, “As per the All-India organization of chemists & druggists (AIOCD) data, Torrent pharma’s growth in Q1 stands at 9% against the IPM growth of 4%.” He further added that Curatio business was doing well with 18% YoY growth in Q1FY24, led by the flagship brand Tedibar, a 100 crore brand growing at around 25%. Torrent Pharma acquired Curatio Healthcare for Rs 2,000 crores in September 2022. Curatio is a strong player in the cosmetic dermatology segment and has a 50 brand portfolio in India. Speaking on Curatio’s EBITDA margins which were around 7%, Mehta said, “Further, incremental margin expansion is looking visible in the coming quarters. We are on track to reach our base business level margin in the near future given the current trajectory.” Torrent Pharma’s overall underlying growth adjusted for the NLEM impact, is at 16% with roughly 5% contribution from Curatio in Q1FY24.
Torrent Pharma’s consumer health division is another future growth driver for India business. The company launched Shelcal-500 and is planning its national rollout in the coming few months. On similar lines, a pilot plan for Unienzyme has been launched in some key states and the campaign for Tedibar from the Curatio portfolio is also planned in H2FY2. On the whole, the company expects to launch three-four products by the end of this year and five products next year through its consumer health business.
Germany growth revives, US market not a top priority
The German business reported revenues of Rs 258 crore up 21% YoY in Q1FY24. Since the last two quarters, the business is witnessing steady sequential recovery, driven by new tender wins, cost improvement strategies and OTC expansion. Speaking on German business growth prospects, Sudhir Memon, CFO, Torrent Pharma said, “Tenders that we participated in Q1, will actually start materializing in Q4 because there’s a time difference of 6 months. So, I can optimistically guide you towards the higher threshold of sales in Q4 of this year and more or less stable sales for Q2 and Q3.”
Brazil reported muted revenue growth of 3% YoY in Q1FY24. Revenues came in at Rs 190 crore in June Quarter 2023. According to the management, growth was lower due to revenue recognition in July due to delay in dispatch to one of its largest customers. Adjusted for this, the underlying growth is 17%. Speaking on Brazil growth, Sanjay Gupta, executive director (international business), Torrent Pharma said, “As per secondary data set, Torrent’s growth is 15% versus branded generic market growth of 11%.” The company expects to perform strongly in Q3 and Q4FY24 in Brazil. And lastly the US revenue growth of Rs 293 crore fell by 2% YoY in Q1FY24. Growth was impacted by price erosion on base portfolio and lack of new launches pending inspection of Dahej facility. The company has recently received, Establishment Inspection Report (EIR) for its Dahej facility which indicates that the company will now start getting filed ANDAs approvals. This will further enhance the company’s prospects and foster growth in the US market. “We would be planning to launch at least a mid-single digit to close to double digit number of products which are pending from Dahej”, said Gupta. But the US market is not a top priority for Torrent Pharma unlike its top-tier peer group. On US market focus, Gupta said, “Our focus is not so much on the US market. We’ve substantially diversified our ongoing R&D investments also. The portfolio which used to be skewed a lot towards the US, is now kind of evenly distributed across our various geographies.” He further said that the investments going into the US are considerably lower in proportion to what they were 2-3 years ago. Torrent Pharma’s focus is the domestic market which accounts for nearly 50-55% of its revenue base. If Torrent Pharma acquires Cipla, it would become India’s second largest pharmaceutical company after Sun Pharma. But this is wishful thinking.
