Shares of Torrent Pharmaceuticals Ltd. posted their worst single-day drop in more than 20 years as most analysts slashed target price after the drugmaker missed estimates in the third quarter, and on steep price erosion in the U.S. and slowdown in the German business.
Delay in new approvals due to regulatory issues at its Indrad and Dahej facilities, higher freight expenses and lower manufacturing volumes are other challenges facing the company, analysts highlighted in their post-earnings research reports.
The stock fell 17.71% intraday but closed 15.11% down at Rs 2,683.5 apiece. Of the 31 analysts tracking the company, 16 maintain a 'buy', nine suggest a 'hold' and six recommend a 'sell', according to Bloomberg data. The 12-month consensus price target implies an upside of 21.7%.
The stock's trading volume was nearly 15 times the 30-day average volume at market close. Its relative strength index was at 23, suggesting it may be 'oversold'.
Key Q3 FY22 Highlights (Consolidated, YoY)
Revenue up 6% at Rs 2,108 crore, against the estimated Rs 2,172 crore.
Net profit down 16% at Rs 249 crore, compared with the Rs 329-crore forecast.
Ebitda down 11% at Rs 538 crore, against the Rs 683-crore estimate.
Margin contracted to 25.5% from 30.4%
Approved an interim dividend of Rs 25 apiece.
Here's what analysts have to say about Torrent Pharma's Q3 FY22 results...
Motilal Oswal
Maintains 'neutral' with the target price reduced to Rs 2,880; an implied return of -8.89%.
U.S. generics business dragged the December-quarter performance, as lack of new approvals and steep price erosion in the base business adding to the challenges.
Domestic formulation business remains strong.
Reduces FY22E/FY23E/FY24E earnings per share estimate by 13%/7.5%/3.5% to factor in reduction in price realisation of certain products in the U.S., delays in new approval due to regulatory issues at Indrad/Dahej, and competition in the German business.
Management expects impact to the turn of 2-2.3% of sales to normalise over the medium term.
Company may exhibit year-over-year earnings decline in FY22 after two years of strong YoY earnings growth.
Prabhudas Lilladher
Maintains 'buy' with the target price reduced to Rs 3,560 from Rs 3,600; still an implied return of 32.79%.
December-quarter performance was disappointing, but profitability and margins are likely to normalise from FY23 onwards aided by price hike in branded generic business.
Expects 18% EPS compound annual growth rate over FY21-24E.
Cuts FY22E EPS by 6%, and marginally slashes FY23 and FY24E EPS by 3% and 1%, respectively.
Strong India business performance offset by weakness in the U.S. and German businesses.
Higher freight expenses, provisions, and lower manufacturing volumes weigh on margins.
ICICI Securities
Maintains 'hold' with the target price reduced to Rs 3,134 from Rs 3,172.
Steep erosion in the U.S business and margin pressure dent Q3.
Improvement in India business supported by dominant chronic segment augurs well.
Uncertainty in the resolution timelines at two facilities and slower-than-expected business recovery in Germamy may affect the stock in the near-to-medium term.
Expects the U.S. sales to remain muted in the near term.
Lowers FY23E-24E revenue and EPS estimates by 2-3% and 6-4% respectively to factor in lower growth in Germany and the U.S.
ICICI Direct Research
Maintains 'hold' with the target price raised to Rs 3,235 from Rs 3,110; an implied return of 2%.
Visible, persisting challenges in the U.S. business is an area of concern.
Company expects traction in the branded markets with Germany expected to recover in FY23.
Prolonged delays in re-inspection of the U.S. facility on account of the pandemic alongside higher than expected pricing pressure in the U.S. business has adversely affected the quarterly performance.
India business continues to be on a strong footing.
Expects leverage situation to improve substantially given consistent free cash flow generation and moderation in core capex.
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