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Torrent Pharma - Healthy Dose

| 11/21/2011 10:30 AM Monday

Banking on the generics and CRAMs business, Torrent Pharma (TPL) is set to post decent growth in FY12 and FY13. TPL has an annual consolidated turnover of Rs 2226 cr, and is available at a market cap of Rs 4797 cr. Its topline has increased at a CAGR of 18% over the past 5 years. Its net level performance was even better, with a 36% CAGR over the same period.

TPL has consistently been a dividend paying company, and for the latest financial year ended, it declared a 160% dividend on a face value of Rs 5. Another interesting aspect about TPL is that not a single share has been pledged by the promoters (when pledging of shares by promoters has in fact, become another risk factor in today’s environment), and the company has a very low debt-to-equity ratio. The icing on the cake is that the counter has remained relatively firm in the year 2011, when the overall market environment was quite volatile, with a YTD loss of market cap of a mere 3% as against a 20% fall in the Sensex and a 10% decline in the BSE Healthcare Index.

TPL draws revenues from formulations, both in the domestic as well as the international markets. It also has a sizeable presence in the CRAMs business. Domestic formulations bring in about 38% of its total revenues. In FY11, revenues from the domestic formulations business grew by 15% to Rs 838 cr. In this market, TPL has a basket containing products from various therapeutic segments, like diabetology, cardiovascular, central nervous system, etc. The company has also forayed into the therapeutic segment of gynaecology, with 19 products currently and six more in the pipeline.

International business is the main revenue driver, contributing about 51% of its revenues. Revenues from this segment grew by 16% to Rs 1125 cr in FY11, driven by good volumes. It also has a good geographical spread of revenues. The CRAMs business has provided many opportunities to Indian pharma companies. TPL is no exception, with about 11% of its total revenues coming in from this segment. In FY11, it recorded 16% growth in this segment, with revenues of Rs 238 cr. The company is enhancing its formulations and API facility at the Dahej SEZ in Gujarat, which will be commissioned by FY14-15. Another bulk drug and formulations manufacturing facility at Indrad, also in Gujarat, is under expansion, and is expected to commence operations in H2 FY12.

The company has performed well in H1 of the current year, with consolidated sales standing at Rs 1271 cr and a net profit of Rs 202 cr. Forex gains resulted in pushing up the H1 profits by Rs 17.28 cr. Even if one adjusts for the same, the profit for H1 still shows 23% growth.

We believe that TPL’s earnings would be even higher in the future, as exports are on the rise and the rupee is depreciating. The company has 203 patents approved so far, and it has a decent ANDA pipeline with 30 approvals and 32 more pending. It also has plans to enter the infertility drugs market, and to expand its reach in the lower tier cities with a greater sales force. At the current price of Rs 560, the scrip is available at PE of 16x (trailing 12 months), which leaves decent scope for capital appreciation. It makes sense to grab the scrip in such a highly volatile and uncertain market.

Last Five Quarters (Rs/Cr)
  Sep '11 Jun '11 Mar '11 Dec '10 Sep '10
Sales 683.33 647.49 526.44 577.53 581.51
Other Income 4.25 2.44 1.56 1.82 2.48
Operating Profit 144.92 155.57 66.11 116.81 120.02
Interest 2.93 4.05 2.79 3.45 3.38
Net Profit/Loss 100.77 102.59 42.84 76.91 76.19
Equity Capital 42.31 42.31 42.31 42.31 42.31

Shareholding pattern as on 30/09/2011
Indian Promoters 71.51
Banks, Fin. Inst. and Insurance 12.29
FII 4.81
Private Corporate Bodies 3.75
General Public 7.64
Grand Total 100

 

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