INSUBCONTINENT EXCLUSIVE:
JM Financial has given a sell rating to Torrent Pharmaceuticals with a target price of Rs 1,980 over 12 months.
Torrent Pharma has
outperformed peers in terms of earnings and stock price performance over the last 2 years
in particular, significant risks are seen to the mid-teen growth that is currently being factored in for Torrent in FY21
The brokerage says the US business is expected to remain under pressure in the near term given the regulatory challenges at the Dahej and
Indrad facilities with a resolution unlikely until December 2021
The share price of the company moved down by -1.74 per cent from its previous close of Rs 2550.35
The last traded price is Rs 2505.90
Incorporated in 1972, Torrent has a market cap of Rs 43240.64 crore.
Investment RationaleWith the impact of discontinuation of low margin
tail brands and the synergy benefits of Unichem integration fully realized, Torrent is approaching peak margins with limited room for
Accounting for the impact of Covid-19, at 39 times revised FY21E EPS - 30 times revised FY22E EPS, Torrent is trading at a premium of c.70
per cent and c.55 per cent to its 5-year average trading ranges respectively
The brokerage believes that the valuation premium is untenable with the risks to near-term growth remaining underappreciated and therefore
has downgraded Torrent to sell
FinancialsFor the quarter ended December 31, 2019, the company reported consolidated sales of Rs 1924.00 crore, down -2.24 per cent from
last quarter sales of Rs 1968.00 crore and down -1.23 per cent from last year's same quarter sales of Rs 1948.00 crore
The company reported net profit after tax of Rs 251.00 crore in the latest quarter.
