Emkay Global Financial Services has maintained `Hold` on Torrent Pharma with a price target of Rs 618 as against the current market price (CMP) of Rs 550 in its report dated Jan. 25, 2012. The broking house gave the following rationale:
> Increased competition in key therapies like the Gastro, CNS, CVS and anti-infective segment. Torrent is growing below industry rate in all the therapies.
> The acute portfolio (contributes 45%) grew by only 4% compared to industry growth of 13% and the chronic segment (contributes 55%) grew by 11% against industry growth rate of 18%.
> Among the companies top 10 brands: anti-infective brands like Topcef & Droxyl declined by 3% & 2% and CVS brands like Dilzem & Domstal declined by 4% and
2% (source: AIOCD).
> 71% growth in the US market (50% in USD) led by FTF launch of Zyprexa ODT and Aricept generic. 29% growth in Brazil and 14% growth in Heumann.
> Management has guided for domestic growth rates to improve to industry growth rate in FY13 led by aggressive campaigns and higher promotional expenses in some categories of acute segment. It plans to launch one more division in the acute therapy with an expected additional strength of 400 MRs.
> In the US, the company has filed 3 ANDAs this quarter (5 till date) taking the cumulative filings to 65. Management has guided for 3 ANDA launches in Q4FY12.
> Increased capacity for Insulin manufacturing for Novo-Nordisk and commencement of commercial supplies under the AstraZeneca & other MNCs deal are key long term triggers to watch out for during FY12-14E.
We expect Torrent to report 17% revenue CAGR over FY11-13E. EBIDTA margins are expected to increase from 15.7% in FY11 to 16.5% in FY12E and 17.1% in FY13E. Earnings will grow by 29% CAGR over FY11-13E. We maintain our target price on the stock at Rs 618 (14xFY13E EPS of Rs44) with a `Hold` rating. At CMP, Torrent trades at 15x FY12E and 12x FY13E EPS.
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