Torrent Pharma’s Net Jumps On Lower Input Costs

Ahmedabad based Torrent Pharma has reported a 15% growth in its total revenues to Rs 798 crore in the December quarter of 2012. Net profit however grew by 33% to Rs 112 crore. Lower input costs and interest expenses have helped the company report a good growth in profit.

Torrent derives its revenues from domestic and exports markets. Its domestic business, has two segments; Branded Products and Contract Research And Manufacturing Services. Its domestic branded business grew by 13% on a YoY basis to Rs 260 crore. Revenues from CRAMS on the other hand, declined by 3.58% to Rs 58.69 crore.

Torrent’s growth has been quite subdued when compared to the industry average. During the quarter its total domestic revenues grew by just 10% compared to the average growth of about 16%-17% which the domestic pharma market has been registering.

The company’s export revenues during the quarter grew by 17% to Rs 448 crore. US revenues clocked a handsome growth of 44% while those from Germany grew by 15%. In rest of Europe and Russia its business grew by 14%. Revenues in Brazil however, have declined by 3% during the quarter. In the September 2012 quarter too, revenues in Brazil had declined on account of the strike by the Brazilian regulatory organization. This strike has affected the clearance of goods form the port due to which it has seen a decline in sales. For the first nine months of the fiscal, its export revenue grew by 22%. This growth rate however is still low compared to the other dominant pharma companies which are managing a growth rate of over 30% in the exports segment.

On the margin front, lower operating costs have seen the company report a 268 basis points jump in the EBITDA margins to 20.21%.

Interest expenses declined by 35% to Rs 6.73 crore while its interest coverage ratio remained very strong at 22x. Its effective tax rate during the quarter remained at 21% compared to 19% during the year ago period.

For the nine months ended December 31, 2012, Torrent has reported a topline growth of 30% to Rs 1996 crore while bottom line growth came in at 70% to Rs 393 crore.

On the valuation front the stock is trading at a PE multiple of 19x its trailing twelve month EPS of Rs 37.8. This is in line with its peer group companies. The stock has given a 30% return in last one year and we see the moderate growth traction to continue going ahead.