Buy Torrent Pharmaceuticals; target of Rs 1730: Sharekhan

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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Sharekhan's research report on Torrent Pharmaceuticals

Torrent Pharma (Torrent) has acquired 100% stake in Curatio Health Care (Curatio) for Rs. 2,000 crore (EV of Rs. 1,885 crore; valuation at 6.9x FY23E EV/sales); Curatio has strong focus on cosmetic dermatology (with 50+ brands). Curatio’s revenues are expected to grow by 18% in FY23 to Rs. 275 crore (with top 5 brands expected to grow by 22%) from Rs. 224 crore in FY22. EBIDTA margins are lower at 26% compared with Torrent at ~30%. However, the same is expected to improve in line with Torrent’s margins through efficiencies. Acquisition will be funded by a mix of debt:internal accruals (80:20). Acquisition will be earnings dilutive by 4-6% in FY2023/24 due to lower margins and high debt funding.

Outlook

Curatio acquisition will place Torrent among top 10 players in dermatology market in India. Thus, acquisition is long-term strategic fit but earnings dilutive in the near term. We maintain Buy with revised PT of Rs. 1,730.

More Info

At 16:01 hrs Torrent Pharmaceuticals was quoting at Rs 1,547.05, up Rs 52.15, or 3.49 percent.

It has touched an intraday high of Rs 1,554.00 and an intraday low of Rs 1,494.05.

It was trading with volumes of 13,710 shares, compared to its thirty day average of 13,862 shares, a decrease of -1.09 percent.

In the previous trading session, the share closed down 2.52 percent or Rs 38.70 at Rs 1,494.90.

The share touched its 52-week high Rs 1,652.23 and 52-week low Rs 1,242.50 on 31 December, 2021 and 12 May, 2022, respectively.

Currently, it is trading 6.37 percent below its 52-week high and 24.51 percent above its 52-week low.

Market capitalisation stands at Rs 52,359.20 crore.

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Torrent Pharmaceuticals - 290922 - khan