Torrent Pharma stock price climbed 3% after strong Q2FY24 results on October 23, 2023. Torrent Pharma, flagship Company of the Torrent Group, is ranked 6th in the Indian Pharmaceuticals Market. 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 more than 50% of its revenue coming from Indian branded generic business. In the post Q2FY24 conference call, the management highlighted its commitment to deepen presence in branded generics business in India, maintain growth momentum in Germany and Brazil and aim to return to profitable growth in the US business.
Robust Q2FY24, strong margin guidance
Torrent Pharma reported revenues of Rs 2,660 crore, rising 16% YoY in Q2FY24. Double-digit revenue growth was driven by the India market (Rs 1,444 crore) which contributed 54% to its total revenue basket. India business grew 18% YoY in September Quarter 2023.
Operating margin was strong at 31% in Q2FY24 up 138 basis points(bps) YoY. Strong operating margin performance was supported by price increases and better product mix. According to the management, price increases in branded generics segment (72-73% of total revenues) and operating leverage will aid strong margin performance in the near future. Net profit came in at Rs 386 crore, up 24% YoY in September Quarter 2023.
Consistent India business performance, Curatio growth stable
India business revenue came in at Rs 1,444 crores, up 18% YoY in Q2FY24. Excluding Curatio business, the base business growth was 12% in Q2FY24 compared to market growth of 4% as per the All India Organization of Chemists and Druggists (AIOCD) data set. Torrent Pharma acquired Curatio Healthcare for Rs. 2,000 crores in September 2022. Curatio is a strong player in the cosmetic dermatology segment with a portfolio of more than 50 brands in India. The Curatio portfolio delivered 17% YoY growth in Q2FY24 driven by the flagship brand, Tedibar. Tedibar continued its growth trajectory upwards of 25% on account of increased activation at pediatricians and on digital media and e-commerce platforms.
Speaking on India business, Aman Mehta, Wholetime Director, Torrent Pharma said, “Our market outperformance was led by continued double digit growth in chronic therapies, revival in gastro demand, traction in the consumer division and new launch performance.” According to the management, new launches in chronic business such as Sitagliptin continue to do well and the management expects to clock Rs 100 crore revenues in Q3FY24 supported by aggressive field force expansion. India business has been growing consistently in double-digits over the past 10 quarters.
Germany and Brazil Support Growth, US Still In Negative Zone
The German business reported revenues of Rs 266 crore up 21% YoY in Q2FY24. Constant currency revenue was €30 million, up by 8% YoY. Sudhir Memon, CFO, Torrent Pharma said, “During Q2, Torrent had good wins in tenders, which will have a positive impact on sales starting in the Q4FY24 timeframe.” He further added that the impact of their sales force expansion will be visible in their over the counter (OTC) business by the end of this year. The company is taking steps to augment growth by launching new products (five products were launched in H1FY24), developing its OTC business and focussing on cost optimization to improve the competitiveness in the German tender segment.
After reporting muted revenue growth of 3% YoY in Q1FY24, Brazil is in the double-digit zone in September Quarter 2023. Revenues came in at Rs 252 crore in Q2FY24, up 36% YoY. The company is expanding its field force in the CNS segment and also launching new products in Brazil. Sanjay Gupta, Executive Director, International Business at Torrent Pharma said, “We’ll be launching four more products before the end of the financial year; two in CNS and two in cardio diabetes. Our generics business in Brazil continues to show strong momentum.” The company expects its Brazil business to perform strongly in Q3 and Q4FY24.
And lastly the US business continues with its poor growth reporting 15% YoY revenue fall in September Quarter 2023. Revenues came in at Rs 248 crore in Q1FY24 from the US markets. According to the management, revenue fall was mainly due to loss of low margin business and some short-term supply issues. Torrent Pharma’s Dahej facility has recently received, Establishment Inspection Report (EIR) in September 2023. While the company will start filing for new products from Dahej facility, oncology product from Bileshvarpura facility and niche derma CGT product from Pithampur has already been launched in the US market. But the company is awaiting US FDA clearance for its Indrad plant (Gujarat) which will further support its US business. The Indrad plant received three observations from the USFDA in January 2023. Hopefully the clearance of the Indrad plant and new filling from Dahej will drive US business to clock more than $ 200 million as guided by Torrent Pharma management.
