Torrent Pharma Stock Falls As U.S. Business Drags In Q3
Capsules are laid out for inspection on the production line of a drug factory. (Photographer: Tomohiro Ohsumi/Bloomberg)

Torrent Pharma Stock Falls As U.S. Business Drags In Q3

Shares of Torrent Pharmaceuticals Ltd. fell the most since December as sales declined in the drugmaker’s second-biggest market.

The company’s revenue in the quarter ended December remained flat at Rs 1,995 crore over the year-ago period, according to an exchange filing. That compares with the Rs 2,060.4-crore consensus estimate of analysts tracked by Bloomberg.

The drag in overall top line came on the back of a 24% decline in sales in the U.S., owing to price erosion and base impact of the sartan portfolio discontinuation.

The U.S. business, according to the drugmaker’s FY20 annual report, contributed 19% to its overall sales.

Sales in India, Torrent Pharma’s largest market, rose 7% year-on-year to Rs 930 crore. The company in its conference call said India and Germany are on the recovery path, while the Brazil division offered a positive surprise.

“The U.S. continues to be a major overhang on growth due to multiple headwinds encompassing price erosion, sartan discontinuation and absence of new launches amid pending regulatory U.S. FDA re-inspections in Indrad/Dahej,” Ambit Capital said in a note. “We are now building in 10%/11% top line growth in FY22-23 due to domestic growth reversal, quality management issues resolving in Germany and higher-than-expected growth witnessed in Brazil.”

The brokerage, however, maintained its ‘sell’ rating on the stock, given peak margin and limited possibilities of earnings upgrades.

Other highlights (year-on-year)

  • Net profit rose 18% to Rs 297 crore, against the estimated Rs 292.1 crore.
  • Operating profit rose 12% to Rs 607 crore. Analysts had pegged the Ebitda at Rs 617.1 crore.
  • Margin expanded to 30.4% from 27.5%.

Shares of Torrent Pharma fell as much as 6.8% as of 10:30 a.m. on Tuesday to Rs 2,569 apiece. The stock has snapped a five-day gaining streak, and is the top laggard on the Nifty Next 50.

Of the 35 analysts tracking the company, 16 have a ‘buy’ rating, 10 suggest a ‘hold’ and nine recommend a ‘sell’. The average of Bloomberg consensus 12-month price target implies an upside of 10.1%.

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