Torrent: Cut to ‘reduce’, revise fair value to Rs 2,350 a share

The domestic formulations business had a strong quarter, growing at 11% yo-y, in line with our estimates, though, adjusting for delays in order dispatches, growth was higher at ~15%.

torrent, investment in torrent, where should I invest, expert advise on investments, should I invest in torrent, analyst corner
Working capital rose slightly due to geographic mix.

Torrent’s domestic revenues grew 11% y-o-y, in line with estimates, and 15% y-o-y, when adjusted for Covid delays. While overall revenues were slightly lower than estimates, tight cost control resulted in Ebitda at 6% higher than estimates, with adjusted PAT 29% higher than estimates. The run-up leaves limited room for upside. Downgrade a notch to ‘reduce’ (from ‘add’) and revise fair value to Rs 2,350/share.

The domestic formulations business had a strong quarter, growing at 11% yo-y, in line with our estimates, though, adjusting for delays in order dispatches, growth was higher at ~15%. US sales at $53 million (+$4 million vs KIE) had some benefit from stocking, though, while performances in Brazil (-4.4% y-o-y) and RoW countries (+15% y-o-y) were in line with our estimates. Germany had another poor quarter, declining 10% y-o-y, 13% lower than our estimates, due to implementation of revised SOPs at manufacturing units (second quarter in a row). Tight cost control (SG&A:-8.4% vs KIE) and lower R&D resulted in Ebitda margins expanding to 28.2% (+230bps vs KIE), and Ebitda print 6% higher than our estimates, and PBT 12% higher than our estimates, helped by lower interest cost, and despite lower other income. A one-time tax reversal of Rs 53 crore further boosted PAT, and even adjusting for tax benefits, PAT was 29% higher than estimates. Working capital rose slightly due to geographic mix (declining Germany contribution), as well as delays in collection in lockdown, though, Torrent is firmly on track to reduce > Rs 1,000-crore debt in FY21. Adjusting for amortisation (~Rs 17/share post-tax), it trades at ~25X FY22E EPS or 16X FY22E EV/Ebitda. We largely retain our numbers.

Get live Share Market updates, Stock Market Quotes, and the latest India News and business news on Financial Express. Download the Financial Express App for the latest finance news.

This article was first uploaded on May twenty-eight, twenty twenty, at forty-three minutes past nine in the morning.
Market Data
✕
Market Data