BUY India business holds the Key INDUSTRY PHARMA (as on 27 … Pharma - Update... · 2020-01-28 ·...

COMPANY UPDATE 28 JAN 2020

Torrent Pharma BUY

HDFC securities Institutional Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters

India business holds the KeyWe resume coverage on Torrent Pharma (TRP) with a Buy. Torrent has re-rated substantially in the past three years on the back of strong execution particularly in branded markets. Despite rich valuation, we recommend Buy as TRP offers a solid India franchise, robust earnings growth and superior return profile which justifies the premium over peers. TRP would generate Rs56bn of FCF over FY19-22E. Our TP of Rs 2,250 is based on 15x FY22 EV/EBIDTA implying a target PE of 28x.

India business (chronic led) to outperform peerset -Post the successful turnaround of Unichem, we expectTorrent to consolidate its position in chronic therapiesand also focus on revenue synergies (scaling smallerbrands of Unichem). We expect India biz to grow at11% CAGR over FY19-22E; ahead of the IPM.

Subdued growth in US, resolution of 483s remains key- US biz (18% of revenues) is expected to decline by 2%CAGR in FY19-22e led by delay in approvals (Dahej –OAI and Indrad – WL), shutdown at Levittown facility(WL) and slower ramp up of Losartan. Successfulresolution of Dahej (majority of pending ANDAs) &Indrad (50%+ revenues) will address the key overhang.

Improving FCF to reduce leverage - Torrent’s EBITDAmargin (27% in 9MFY20, best among peers) are furtherset to improve led by improving MR productivity. Weexpect FCF generation of over Rs 56bn over next threeyears which will lower net debt/EBITDA to 0.3x byFY22e from 2x in FY19.

Downside risks: delay in resolution of Dahej (OAI) andIndrad (WL), slower growth in India and launch delaysin the US.

HIGHLIGHTS OF THE QUARTER

Muted growth in India (+8.5% YoY, adjusted for stockistintegration and discontinued products) and Europe (-18% YoY, supply related issues) offset healthy growthin Brazil and RoW markets. EBIDTA margins (27.4%,+100bps YoY, 40bps QoQ) came in line, aided by lowerR&D spend (5.6% of sales).

Key call highlights - a) Reinspection timelines forDahej – mid CY20, Indrad WL –end of CY20; b) expectdebt reduction of Rs9-10bn in FY21; c) R&D exp at 7%of sales.; d) Expect 75bps margin improvement in FY21.

Financial Summary (Consolidated) (Rs mn) Q3FY20 Q3FY19 YoY (%) Q2FY19 QoQ (%) FY18 FY19 FY20E FY21E FY22E Net Sales 19,240 19,480 (1.2) 18,580 3.6 58,671 74,618 77,412 83,605 91,432 EBITDA 5,390 5,260 2.5 4,980 8.2 13,988 19,201 21,398 23,260 25,990 APAT 2,510 2,110 19.0 2,040 23.0 9,035 7,302 9,340 10,878 13,511 Diluted EPS (Rs) 15 12 19.0 12 23.0 53.4 43.1 55.2 64.3 79.8 P/E (x) 38.0 47.0 36.7 31.5 25.4 EV/EBIDTA (x) 28.1 19.9 17.4 15.6 13.5 RoCE (%) 12.5 14.3 16.5 18.7 20.8 Source: Company, HDFC sec Inst Research

INDUSTRY PHARMA CMP (as on 27 Jan 2020) Rs 2,027 Target Price Rs 2,250 Nifty 12,119 Sensex 41,155 KEY STOCK DATA Bloomberg TRP IN No. of Shares (mn) 169 MCap (Rs bn) / ($ mn) 343/4,800 6m avg traded value (Rs mn) 509 STOCK PERFORMANCE (%) 52 Week high / low Rs 2,074/1,452

3M 6M 12M Absolute (%) 16.3 21.1 8.9 Relative (%) 11.4 12.5 (5.3) SHAREHOLDING PATTERN (%)

Sep-19 Dec-19 Promoters 71.25 71.25 FIs & Local MFs 13.13 12.32 FPIs 7.66 8.48 Public & Others 7.96 7.95 Pledged Shares* - - Source : BSE, *% of total

Bansi Desai, CFA [email protected] +91-22-6171-7341

TORRENT PHARMA : COMPANY UPDATE

Page | 2

Contents Key Charts ........................................................................................................................................................ 3

Resume coverage with a Buy ............................................................................................................................ 5

India business offers sustainable growth ......................................................................................................... 6

Field force productivity is set to improve ......................................................................................................... 7

US outlook remains muted ............................................................................................................................... 7

Brazil business to grow ahead of industry ........................................................................................................ 8

Valuation and risks ......................................................................................................................................... 10

Peer comparison ............................................................................................................................................ 11

Financials ....................................................................................................................................................... 12


Page | 3

Key charts

Revenue Split – Dominant share in India India biz gains strength post Uncihem acquisition

Source: Company, HDFC sec Inst Research, FY20 revenues Source: Company, HDFC sec Inst Research

Field force productivity is set to further improve Growth break up

Source: Company, HDFC sec Inst Research Source:AIOCD, Company, HDFC sec Inst Research

Branded generic markets – India and Brazil accounts for ~50%+ revenues

Successful track record of turnaround with Elder and Unichem

Filed force productivity has improved to pre-Unichem levels and is further set to improve

Domestic growth is largely driven by price as per AIOCD, we expect volume growth to inch up

Domestic44%

US19%

Brazil9%

Europe12%

RoW 10%

Others6%

-5

10 15 20 25 30 35 40 45 50

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

E

FY21

E

FY22

E

Acquired Unichem

Acquired Elder brands

0.4 0.4

0.6 0.6

0.4

0.6 0.7 0.7

0.8

-0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

FY14

FY15

FY16

FY17

FY18

FY19

FY20

E

FY21

E

FY22

E

Field force productivity

Rs mn per month

Unichem acquisition

4.7 4.4

-5.5

1.1 1.5

5.8 4.9

0.5

5.98.2

2.7 3.0

3.1

4.32.1

-10

-5

0

5

10

15

Mar

-16

Mar

-17

Mar

-18

Mar

-19

Dec-

19

Volume Price New Products


Page | 4

Key charts Scope to gain market share in key brands exists US business to decline marginally over FY19-22e

Brands Growth (FY19, %) Torrent's

Market Share Torrent Market Shelcal 28 9 32 Losar 11 2 42 Nexpro 17 17 32 Chymoral 29 17 57 Nebicard 15 14 50 Azulix 22 11 3 Deplatt 5 4 20 Nikoran 16 14 54 Veloz 25 8 7 Rozucar 36 17 7 Unienzyme 30 12 34 Ampoxin 11 9 4 Telsar 13 17 2 Vizylac 19 17 7

Source: AIOCD, HDFC sec Inst Research Source: Company, HDFC sec Inst Research

ANDA filing momentum to continue PE has re-rated; premium valuation to sustain

Source: Company, HDFC sec Inst Research Source: Bloomberg, HDFC sec Inst Research

Key brands have scope to expand market share in their respective covered market

US business growth impacted by delay in approvals (Dahej – OAI and Indrad – WL), shutdown at Levittown facility (WL) and slower ramp up of Losartan post the re-launch.

However, ANDA Filing momentum remains strong

Premium valuation to sustain driven by higher earnings growth, reducing leverage and superior return ratios

1

3 3

4

6

2 2

3

6

2

7

6

5

3

6

3

-

1

2

3

4

5

6

7

8

Q4F

Y16

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Q2F

Y18

Q3F

Y18

Q4F

Y18

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

Q1F

Y20

Q2F

Y20

Q3F

Y20

49 65

128 136

405

201 161

214 203 200 199

-50

100 150 200 250 300 350 400 450 500

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

E

FY21

E

FY22

E

US revenues (USD mn)

gAbilify

0

5

10

15

20

25

30

35

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Jan-

15Ju

l-15

Jan-

16Ju

l-16

Jan-

17Ju

l-17

Jan-

18Ju

l-18

Jan-

19Ju

l-19

Jan-

20


Page | 5

Resume coverage with a Buy

We estimate Torrent’s sales and earnings to record7% and 22% CAGR, respectively, over FY19-22e drivenby India and Brazil business.

India business is expected to post a 11% CAGR overthe next three years, driven by increased focus on keybrands, improving field force productivity and pricehikes of ~4-5% on the overall portfolio.

Brazil biz is expected to register 10% CAGR, ahead ofthe industry growth, over next three years.

US revenues to decline by 2% CAGR over FY19-22owing to regulatory issues at Dahej and Indrad.

We model R&D cost at ~7% of sales.

Revenue mix summary (Rs mn) FY18 FY19 FY20E FY21E FY22E FY19-22E Comments

India 23,510 32,350 35,064 39,272 43,984 11% Revenue synergies and chronicportfolio to drive growth

US 11,000 15,260 14,791 14,174 14,140 -3% US revenues to be impacted by regulatory issues

Brazil 7,090 6,890 7,496 8,321 9,236 10% Field force productivity, new launcheswill drive growth

Europe 9,120 10,090 9,350 10,029 11,032 3% Germany is the key region. Ranks 4th with market share of ~7%

RoW 5,220 6,840 7,704 8,628 9,663 12% Russia, other Latam, Asian markets Contract manufacturing & Others

4,080 4,670 4,694 4,928 5,175 3% Manufacturing of human insulins for Novo Nordisk for their India Market and dossier out licensing business

Net sales 60,020 76,100 79,098 85,352 93,231 7% Driven mainly by India business

EBITDA margin 23.3% 25.2% 27.0% 27.4% 27.9% Price hikes and improvement in field force productivity in India will drive margins

Source: HDFC sec Inst Research

India and Brazil markets to offset weak growth in US

R&D exp to remain at 7% of sales

EBIDTA margin to improve by ~100bps over FY19-22 led by field force productivity


Page | 6

India business offers sustainable growth Torrent ranks 8th with 3.4% market share in IPM (per

AIOCD, Dec 2019). India business grew at 11.7% for9MFY20, ~200bps ahead of Industry growth led byprice growth (~8%). Chronic segment grew by 12%,300bps ahead of market growth as on MAT Dec 19.

Chronic & semi-chronic accounts for ~73% of sales

Source: AIOCD, HDFC sec Inst Research

Scope to enhance market share exists

Torrent’s top brands (Rank 5-15) have further scopeto gain market share from current levels (refer tablebelow).

Unichem brands such as Vizylac, Telsar have marketshare of less than 10% in their respective coveredmarket. Top Uncihem brands Losar and Unienzymetoo has potential to grow ahead of the market. Shareof Losar is ~42% in the Losartan category, however,price hikes can further fuel the growth, given themolecule is out of price control. Likewise, Unienzymewhich is an OTC brand is now being promoted on Rxplatform as well which should accelerate growth.

Brands Torrent growth (%) Market growth (%) Market Share

I yr 4 yr I yr 4 yr 2015 2019 Shelcal 12.2 17.8 6.3 6.5 19.6 29.3 Nexpro 17.5 12.6 17.4 13.8 32.0 30.6 Losar 3.0 4.7 1.5 1.9 31.2 34.9 Chymoral 12.4 18.8 7.6 8.7 39.9 56.9 Nebicard 14.7 12.9 14.4 13.3 46.3 45.7 Azulix 17.2 14.2 10.6 11.6 2.9 3.2 Veloz 31.6 15.6 6.5 6.5 5.9 8.1 Deplatt 5.2 2.9 2.8 3.9 20.2 19.4 Nikoran 9.4 5.6 10.7 8.4 56.4 50.8 Rozucor 20.7 13.7 14.9 16.5 6.9 6.3 Ampoxin 24.6 4.4 13.8 6.6 4.3 3.9 Dilzem 4.6 4.5 3.6 4.0 69.6 71.1 Unienzyme 8.0 9.9 10.6 9.4 32.1 32.7 Pregalin 12.2 11.8 8.5 8.7 8.5 9.5 Telsar 16.3 7.1 16.5 14.3 3.1 2.4 Vizylac 31.4 12.8 11.6 11.2 9.5 10.1 Source: AIOCD, HDFC sec Inst Research

Acquired Unichem for Rs 36bn in Dec 17 at c.4.2x FY17 sales in cash and Elder's portfolio of 30 brands for INR20bn in 2014

Elder brands have seen strong growth post acquisition - Shelcal (16% CAGR) and Chymoral (18% CAGR) over Mar 15-19.

Key Uncihem brands – Losar, Unienzyme have also outperformed the covered market growth in last one year

Scope to improve growth and market share exists in smaller brands of Uncihem – Ampoxin, Telsar, Vizylac

Cardiac 30%

Gastro Intestinal

16%Neuro / Cns

15%

Vitamins / Minerals / Nutrients

13%

Anti Diabetic 8%

Pain / Analgesics

7%

Anti-Infectives 5%

Derma 3% Gynaecological

2% Others 1%


Page | 7

Field force productivity is set to improve

Torrent's field force productivity for the combinedentity post the Unichem acquisition had declined toINR0.4mn per month. Post the integration,rationalization of field force and reduction inUnichem's attrition rate (from 40% to 20%) led toimproved productivity of INR0.6mn per month (pre-Unichem acquisition levels). With the increase intopline, we expect productiviity to further improve toINR0.8mn by FY22e.

Filed force producitivity to inch up


US outlook remains muted

We forecast Torrent’s US sales (~19% of FY20revenues) to decline by 2% CAGR over FY19-22e ascontribution from new launches, market share gainswill be offset by the slower ramp up in Losartanrelaunch, shutdown at the Levittown plant, anddelays in new approvals (OAI at Dahej and WL atIndrad). Torrent has c.45 ANDA pending approvalsand 6 tentative approvals. It expects single digit

product launches in FY21. We expect R&D costs to be at c.7% of sales.

US revenues to decline at 2% CAGR over FY19-22e

Source: Company, HDFC sec Inst Research

ANDA Filing momentum remains strong


Filed force productivity has increased to pre-Unichem level.

Filed force strength – 4,000

Expect producitivity to inch up to Rs 0.8mn per month in line with Industry leaders like Sun Pharma.

Sun Pharma’s MR producitivity stands at Rs 8.5mn p.a.

US business – 45 pending ANDAS. Expect single digit product launches

Base business has seen market share gains

0.4 0.4

0.6 0.6

0.4

0.6 0.7 0.7

0.8

-0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

FY14

FY15

FY16

FY17

FY18

FY19

FY20

E

FY21

E

FY22

E

Field force productivity

Rs mn per month

Unichem acquisition

49 65

128 136

405

201 161

214 203 200 199

-50

100 150 200 250 300 350 400 450 500

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

E

FY21

E

FY22

E

US revenues (USD mn)

gAbilify

1

3 3

4

6

2 2

3

6

2

7

6

5

3

6

3

-

1

2

3

4

5

6

7

8

Q4F

Y16

Q1F

Y17

Q2F

Y17

Q3F

Y17

Q4F

Y17

Q1F

Y18

Q2F

Y18

Q3F

Y18

Q4F

Y18

Q1F

Y19

Q2F

Y19

Q3F

Y19

Q4F

Y19

Q1F

Y20

Q2F

Y20

Q3F

Y20


Page | 8

Brazil business to grow ahead of industry

Torrent is the largest Indian company in Brazil. Interms of prescription share, Torrent is ranked 14th

and has climbed 3 places over 2017. The Brazilmarket has slowed down to mid-single-digit growth inFY19 from double-digit growth witnessed in FY13.Torrent's presence in Brazil is largely in the brandedgeneric segment, which accounts for ~85% of thecompany's revenues. It has ~34 products in themarket and 5-6 pending filings.

Torrent continues to outperform the market growth.For MAT Mar 2019, Torrent grew at 10% vs themarket growth of 8%. It expects to grow c.200-400bps ahead of the industry andaccordingly weforecast ~10% CAGR over FY19-22 on the back of newlaunches, improvement in field force productivity,and price increases.

Launched Abilify in Brazil with 14% market share


Page | 9

Quarterly Financials Snapshot (Consolidated) (Rs mn) Q3FY20 Q3FY19 YoY (%) Q2FY19 QoQ (%) Net Sales 19,650.0 19,880.0 (1.2) 18,940.0 3.7 EBITDA 5,390.0 5,260.0 2.5 4,980.0 8.2 Other income 530.0 30.0 1,666.7 100.0 430.0 Depreciation 1,630.0 1,560.0 4.5 1,520.0 7.2 Interest 1,100.0 1,330.0 (17.3) 1,260.0 (12.7) PBT 3,190.0 2,400.0 32.9 2,300.0 38.7 Tax 680.0 290.0 134.5 260.0 161.5 Tax Rate (%) 0.2 0.1 76.4 0.1 88.6 Minority Interest 0.0 0.0 0.0 Adjusted PAT 2,510.0 2,110.0 19.0 2,040.0 23.0 EO income/ (exp.) 0.0 350.0 (100.0) (250.0) (100.0) Reported PAT 2,510.0 2,460.0 2.0 1,790.0 40.2 EBITDA margins (%) 27.4 26.5 26.3 Source: Company, HDFC sec Inst Research

Margin Analysis Q3FY20 Q3FY19 YoY (bps) Q2FY19 QoQ (bps) FY18 FY19 FY20E FY21E FY22E

Material Expenses % Net Sales 27.6 29.2 (159) 28.4 (82) 27.9 28.7 27.4 27.2 27.0 Employee Expenses % Net Sales 18.0 18.5 (50) 18.1 (9) 18.9 18.4 18.2 18.2 18.2 R&D Expenses % Net Sales 5.6 6.8 (119) 7.2 (158) 7.7 7.1 6.2 7.0 7.0 Other Expenses % Net Sales 21.4 19.1 231 20.0 136 22.2 19.5 21.2 20.3 19.9 EBITDA Margin (%) 27.4 26.5 97 26.3 114 23.3 26.3 27.0 27.3 27.9 Tax Rate (%) 21.3 12.1 923 11.3 1,001 7.9 21.0 20.8 23.0 22.0 APAT Margin (%) 12.8 10.6 216 10.8 200 12.4 9.7 11.8 12.7 14.5 Source: Company, HDFC sec Inst Research

Geography wise performance(Rs mn) Q3FY20 Q3FY19 YoY (%) Q2FY19 QoQ (%) India 8,710 8,350 4.3 8,160 6.7 US 3,810 4,270 (10.8) 3,930 (3.1) Brazil 1,890 1,680 12.5 1,470 28.6 Germany 2,190 2,670 (18.0) 2,510 (12.7) Other markets 1,950 1,710 14.0 1,670 16.8 Others (Contract Mfg.) 1,100 1,200 (8.3) 1,200 (8.3) Total Sales 19,650 19,880 (1.2) 18,940 3.7 Source: Company, HDFC sec Inst Research

Muted growth in India and Europe offset healthy growth in Brazil and RoW markets

EBIDTA margins (27.4%, +100bps YoY, 40bps QoQ) came in line, aided by lower R&D spend (5.6% of sales).

As per AIOCD, India grew by 11.7% in 3Q. Growth break up: Price- 8%, Volume -1.8% and new products -2%

Launched 3 key brands in India – Vildagliptim, Remogliflozin, Ticagrelor

Tax rate to inch up to 23-24%

Capex guidance at Rs3bn


Page | 10

Valuation and risks Valuation

We rate Torrent a Buy with a target price of Rs 2,250.

Torrent has re-rated substantially in the past threeyears on the back of strong execution and is nowtrading at a premium to its peers.

Our TP is based on 15x FY22 EV/EBIDTA implying attarget PER of28x to factor strong India business andFCF generation of Rs56bn over FY19-22. The Indiabusiness has a favorable growth outlook.

We expect operating leverage and improvement infield force productivity to drive margin expansionover the next three years.

The US business is expected to remain muted asregulatory issues at plants will delay approvals.

Brazil and Germany account for c.20% of revenuesand are expected to post above-industry growth intheir respective markets.

Key catalysts

Resolution of Dahej (OAI) and Indrad (WL) facilities

Reduction in leverage

Risks

Slower growth in the Indian formulations market

Delays in resolution of OAI at Dahej and WL at Indradfacilities

Higher price erosion in the US generics market

Torrent – PER has re rated, premium to sustain

Source: Bloomberg, HDFC sec Inst Research

0

5

10

15

20

25

30

35

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15

Jul-1

5

Jan-

16

Jul-1

6

Jan-

17

Jul-1

7

Jan-

18

Jul-1

8

Jan-

19

Jul-1

9

Jan-

20


Page | 11

Peer Set Comparison

Company Market Cap (Rs. bn)

CMP (Rs./ Sh)

RECO TP PER(X) EV/ EBITDA (X) ROE FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E

Aurobindo 299 511 NA NA 10.9 9.4 9.0 7.1 6.1 5.7 17.6 17.2 15.7 Cipla 375 464 NA NA 21.0 18.3 16.4 11.0 10.2 9.4 17.9 18.0 18.1 Dr. Reddy's 529 3,189 Neutral 3,440 24.3 22.5 18.5 16.6 13.3 11.2 14.4 13.7 14.6 Lupin 340 751 NA NA 31.2 21.3 18.3 12.3 10.2 9.2 7.8 10.6 11.3 Sun 1,076 449 NA NA 23.7 20.1 17.7 15.0 12.9 11.7 10.5 11.2 11.7 Torrent 343 2,027 Buy 2,250 36.7 31.3 25.4 17.4 15.5 13.5 17.9 19.0 20.8 Alkem 282 2,360 NA NA 27.1 23.1 20.0 20.5 17.3 15.1 17.9 18.0 18.1 Cadila 278 273 NA NA 19.4 16.9 15.3 12.9 11.6 10.8 12.7 13.4 13.7 Glenmark 101 356 NA NA 14.0 11.6 10.2 7.5 6.6 5.9 11.9 12.4 12.8 Ipca Labs 156 1,225 NA NA 25.9 21.1 18.1 17.5 14.8 12.8 17.3 18.0 17.7 Eris Lifesciences 69 505 NA NA 19.8 17.1 14.5 16.6 14.6 12.7 26.8 25.2 22.5



Page | 12

Income Statement (Consolidated) (Rs mn) FY18 FY19 FY20E FY21E FY22E Net Revenues 58,770 74,618 77,412 83,605 91,432 Other operating income 1,250 1,480 1,696 1,746 1,799 Total Revenues 60,020 76,098 79,108 85,352 93,231 Growth (%) 2.5 26.8 4.0 7.9 9.2 Material cost 16,740 22,197 21,664 23,256 25,172 Gross margin (%) 73.6 72.2 74.2 74.3 74.4 Employee Benefits Expense 11,353 14,038 14,382 15,574 17,012 R&D 4,600 5,380 4,911 5,975 6,526 Other Expenses 13,340 15,283 16,753 17,287 18,530 Total expenditure 46,033 56,897 57,710 62,092 67,241 EBITDA 13,988 19,201 21,398 23,260 25,990 Margins (%) 23.3 25.2 27.0 27.3 27.9 Depreciation 4,086 6,177 6,452 6,582 6,600 EBIT 9,902 13,024 14,946 16,678 19,390 EBIT margin (%) 16.8 17.5 19.3 19.9 21.2 Other income 2,988 570 800 808 835 Interest 3,085 5,038 3,950 3,359 2,903 Extraordinary Items (EO) (2,260) (2,940) 0 0 0 Tax 770 1,254 2,456 3,249 3,811 Tax rate 10.2% 22.3% 20.8% 23.0% 22.0% Adj. PAT 9,035 7,302 9,340 10,878 13,511 Growth % y-o-y -3.2% -19.2% 27.9% 16.5% 24.2%


Balance Sheet (Consolidated) (Rs mn) FY18 FY19 FY20E FY21E FY22E Share Capital 846 846 846 846 846 Reserves & Surplus 45,376 46,397 51,248 56,897 63,914 Shareholders' Funds 46,222 47,244 52,094 57,744 64,761 Other long term liabilities 3,068 3,108 3,108 3,108 3,108 Long Term 41,053 39,098 35,098 27,098 24,098 Short Term 16,318 9,372 9,372 9,372 9,372 Total Debt 57,371 48,470 44,470 36,470 33,470 Deferred Tax Liability (net) (3,169) (4,038) (4,038) (4,038) (4,038) Total Equity and Liabilites 103,497 94,785 95,635 93,285 97,302 Gross Block 90,510 96,006 99,506 103,006 106,506

Less : Accumulated Depreciation 15,948 21,877 28,329 34,911 41,510

Net Block 74,562 74,129 71,177 68,096 64,996 Capital WIP 6,469 6,171 6,171 6,171 6,171 Total Fixed Assets 81,031 80,300 77,348 74,267 71,167 Goodwill on consolidation 3,985 3,348 3,348 3,348 3,348 Current Assets 52,623 50,375 59,971 63,646 74,838 Inventories 19,663 19,352 21,547 22,524 24,315 Receivables 12,535 14,357 16,370 17,346 18,836 Cash & Bank Balances 7,334 9,401 14,788 16,510 24,421 Current Liabilities 35,273 41,522 47,315 50,259 54,334 Sundry Creditors 31,999 37,380 43,173 46,117 50,192 Provisions 3,274 4,142 4,142 4,142 4,142 Net current assets 17,350 8,853 12,656 13,387 20,503 Total Assets 103,497 94,785 95,635 93,285 97,302



Page | 13

Cash Flow (Rs mn) FY18 FY19 FY20E FY21E FY22E Net Profit Before Tax 9,310 5,617 11,797 14,127 17,322 Depreciation 4,086 6,177 6,452 6,582 6,600 Cash flow before WC changes 15,379 19,799 22,198 24,068 26,825 WC changes (3,601) 994 1,585 991 793 Taxes paid (2,836) (2,812) (2,456) (3,249) (3,811) Cash flow from operations 8,942 17,981 21,327 21,810 23,807 Acquisition of business/undertaking (39,619) 0 0 0 0

Capex (7,913) (6,628) (3,500) (3,500) (3,500) Cash flow from investing (47,070) (2,413) (3,500) (3,500) (3,500) Borrowings (net) 23,387 2,385 (4,000) (8,000) (3,000) Short term borrowing (net) 16,191 (7,398) 0 0 0 Interest paid (2,757) (5,034) (3,950) (3,359) (2,903) Dividends paid (2,648) (3,097) (4,490) (5,229) (6,494) Cash flow from financing 34,174 (13,145) (12,440) (16,588) (12,397) Net Increase/(Decrease) in Cash and Equivalents (3,954) 2,424 5,387 1,722 7,910

Effect of exchange rate 246 (43) 0 0 0 Beginning cash 10,678 7,023 9,401 14,788 16,510 Closing cash 7,023 9,401 14,788 16,510 24,421 Free cash flow 1,029 11,353 17,827 18,310 20,307


Key Ratios Year to 31 March FY18 FY19 FY20E FY21E FY22E D/E 1.2 1.0 0.9 0.6 0.5 RoACE 10.5 10.2 12.4 13.6 15.9 RoAE 20.1 15.6 18.8 19.8 22.1 RoAIC 11.7 11.1 14.2 16.3 20.2 Invested capital 96,162 85,363 80,826 76,753 72,860 EV/EBIDTA 28 20 17 16 14 EV/Sales 7 5 5 4 4 P/E 38 47 37 32 25 P/Book 7 7 7 6 5 P/FCF 333 30 19 19 17 ROCE 12 14 16 19 21 ROE 20 15 18 19 21 Enterprise Value 393,079 382,112 372,725 363,003 352,093 Market cap 343,043 343,043 343,043 343,043 343,043 CMP 2,027 2,027 2,027 2,027 2,027 No. of shares 169 169 169 169 169 EV/IC 4.1 4.5 4.6 4.7 4.8 Net Debt/ EBITDA 3.6 2.0 1.4 0.9 0.3



Page | 14

Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target 28-Jan-2020 2,077 BUY 2,250

RECOMMENDATION HISTORY

1,300

1,500

1,700

1,900

2,100

2,300

Jan-

19

Feb-

19

Mar

-19

Apr-

19

May

-19

Jun-

19

Jul-1

9

Aug-

19

Sep-

19

Oct

-19

Nov

-19

Dec-

19

Jan-

20

Torrent Pharma TP

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013 Board : +91-22-6171-7330 www.hdfcsec.com


Page | 15

Disclosure: I, Bansi Desai, CFA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock –No HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. Disclaimer: This report has been prepared by HDFC Securities Ltd and is solely for information of the recipient only. The report must not be used as a singular basis of any investment decision. The views herein are of a general nature and do not consider the risk appetite or the particular circumstances of an individual investor; readers are requested to take professional advice before investing. Nothing in this document should be construed as investment advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in securities of the companies referred to in this document (including merits and risks) and should consult their own advisors to determine merits and risks of such investment. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete. HSL is not obliged to update this report for such changes. HSL has the right to make changes and modifications at any time. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently sent or has reached any person in such country, especially, United States of America, the same should be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published in whole or in part, directly or indirectly, for any purposes or in any manner. Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. This document is not, and should not, be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report should not be construed as an invitation or solicitation to do business with HSL. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: [email protected] Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE, BSE, MSEI, MCX: INZ000186937; AMFI Reg. No. ARN: 13549; PFRDA Reg. No. POP: 11092018; IRDA Corporate Agent License No.: HDF 2806925/HDF C000222657; SEBI Research Analyst Reg. No.: INH000002475; SEBI Investment Adviser Reg. No.: INA000011538; CIN - U67120MH2000PLC152193 Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

mailto:[email protected]

BUY India business holds the Key INDUSTRY PHARMA (as on 27 … Pharma - Update... · 2020-01-28 ·...

Documents

Transcript of BUY India business holds the Key INDUSTRY PHARMA (as on 27 … Pharma - Update... · 2020-01-28 ·...