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Motilal Oswal Report
Adding a new lever (consumer healthcare) of growth in India business
Torrent Pharma’s (TRP) 4QFY23 operational performance was marginally below our expectations due to higher opex. TRP continues to outperform the industry in the branded generics segment, with revenue growth of 12.6% YoY in FY23 and EBITDA margin gain of 130bp YoY for the segment.
We trim our FY24/FY25 EPS estimates by 4%/1% to factor in 1) incremental expenses for the consumer healthcare platform, 2) a gradual revival in US sales, and 3) improved growth momentum in the LATAM business. We TRP at 26x 12M forward earnings to arrive at a TP of INR1650.
The company continues to focus on the branded generics business in its key markets of India/Brazil. The strategy of building a consumer healthcare segment in India would further enhance volume growth potential for certain established brands. While a successful resolution of compliance issues is vital for growth in US generics, it has outsourced certain products, which would aid growth in US generics to some extent. Having said this, the current valuation adequately captures the upside in earnings. Maintain Neutral.
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