Maintain ‘buy’ on Torrent Pharma with an increased target price of R1,373 (earlier R1,278).
We value the stock based on 23x (unchanged) FY17f EPS of R59.7 to arrive at our revised target price. The stock is currently trading at 22.4x FY16f EPS of R56.1 and 21.1x FY17f EPS of R59.7.
We increase FY16f and 17f EPS by 32% and 7%, respectively, on better-than-expected gAbilify pricing, launch of gDetrol LA in FY16F, a stronger-than-expected pick up in the performance of the Elder portfolio, currency movements and Q4FY15 performance.
Torrent’s performance in Q4FY15 was below our expectation. Higher employee costs and other expenses had an adverse impact on Ebitda. Employee costs increased ~18% q-o-q on account of restructuring of leave policy, which led to leave encashment in Q4 and can be treated as a one-off.
Ebitda margin came in at ~14%, versus our expectation of 19.8%. Other income at R100 crore was higher than our expectation on account of forex gains.
In terms of regional performance, Brazil reported strong growth of ~33% y-o-y in constant currency and an $8 million q-o-q increase in US reported sales.
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