Torrent Pharma Q1 FY27 beat driven by India growth and JB Chem synergies

Investment View and Valuation

Motilal Oswal Financial Services retains its Neutral rating on Torrent Pharma after a better-than-expected Q1 FY27 performance. The beat was supported by domestic branded formulations, US generics and currency tailwinds, while profitability also benefited from the integration of JB Chem.

The broker believes the current valuation already factors in the anticipated earnings upside, despite healthy operating growth and improving profitability. Its target price of Rs 4,730 is based on 50 times 12-month forward earnings.

Q1 FY27 Financial Performance

Torrent Pharma reported consolidated revenue of Rs 49.2 billion in Q1 FY27, up 54.8 per cent year on year and 6.4 per cent above Motilal Oswal's estimate. EBITDA increased 58.9 per cent to Rs 16.6 billion, 9 per cent ahead of estimate. EBITDA margin expanded 90 basis points year on year to 33.8 per cent, supported by an 80-basis-point improvement in gross margin to 76.4 per cent.

Adjusted PAT rose 4.1 per cent to Rs 5.8 billion, 9 per cent ahead of the broker's estimate. However, higher interest costs limited profit growth. The base business delivered 17 per cent revenue growth and 17 per cent EBITDA growth, while JB Chem, consolidated from January 21, 2026, contributed Rs 12 billion of revenue at an EBITDA margin of approximately 35 per cent.

Domestic Formulations and Semaglutide Growth

India formulations revenue grew 60 per cent year on year to Rs 28.9 billion, representing 59 per cent of total sales. The legacy domestic business grew 19 per cent, while JB Chem's domestic formulations sales increased 13 per cent. Torrent Pharma outperformed the Indian pharma market by 700 basis points, with growth driven by price, volume and new launches.

The company became the number one player in the Indian cardiac market. Generic Semaglutide held a 36 per cent combined oral-and-injectable market share. Oral Semaglutide and reusable pen SKUs generated around Rs 500 million in Q1 FY27.

Management said an injectable Semaglutide supply issue at a manufacturing partner would affect July-August sales. An alternate supply source has been secured, and all SKUs are expected to return by the end of August 2026. Management expects rapid share recovery, while oral Semaglutide and reusable pens were unaffected.

International Business Performance

International performance was mixed across key markets.

• US generics: Revenue grew 36 per cent to Rs 4.2 billion, or 23 per cent in constant currency to US$44 million. Growth was led by new launches, targeted market-share gains and certain one-time opportunities.
• Germany: Revenue increased 3 per cent in reported currency to Rs 3.2 billion but declined 9 per cent in constant currency because of third-party supply disruptions and lower tender uptake.
• Brazil: Revenue rose 27 per cent in reported currency to Rs 2.8 billion, while constant-currency growth was 3 per cent because of a one-time channel inventory reduction. Management said secondary sales remained healthy and estimated that Brazil would otherwise have grown 15-18 per cent in constant currency. Growth is expected to normalise to the mid-teens from Q2 FY27.

Brazil has 58 products under ANVISA review, supporting the market's launch pipeline.

JB Chem Integration and Synergies

Management reiterated expectations for double-digit FY27 revenue growth for the combined India business. It expects JB Chem's international revenue to recover following integration changes, while the JB Chem CDMO business is expected to grow at a high single-digit to low-double-digit rate in constant currency.

Cost synergies are tracking ahead of plan. FY27 realisation is expected to exceed the initial Rs 900 million target and surpass Rs 1 billion. However, JB Chem brand consolidation, portfolio rationalisation and the restructuring of medical representatives could cause temporary revenue disruption over the next two to three quarters.

The combined India field force stood at about 9,400 representatives at the end of Q1 FY27. JB field-force attrition had declined to about 16 per cent in June 2026 from approximately 30 per cent before the acquisition.

Earnings Outlook

Motilal Oswal has largely maintained its FY27 and FY28 estimates. It forecasts a 25 per cent sales CAGR over FY26-28E, a 31 per cent EBITDA CAGR and a 23 per cent earnings CAGR.

Although the broker expects meaningful margin expansion, depreciation and interest costs are expected to moderate earnings growth.

Key Risks and Constraints

• Subdued German revenue growth in constant-currency terms.
• Temporary disruption from JB Chem brand consolidation and portfolio rationalisation.
• Injectable Semaglutide supply disruption during July-August 2026.
• Brazil channel inventory correction.
• Elevated interest and depreciation costs.