Torrent Pharma share price gives up early gains, falls over 2% after Q2 results; should you buy?

It reduced its FY24 earnings estimate by 4% to factor in higher interest cost and moderation in the US generics business. It maintained earnings estimates for FY25.

The brokerage reiterated its ‘Neutral’ rating on the stock due to limited upside from the current levels and has a price target of ₹2,050 per share.

Kotak Institutional Equities

Torrent Pharmaceuticals delivered a largely in-line performance in Q2FY24, with higher LatAM sales being offset by lower US sales. Despite the recent weakness in the IPM, Torrent Pharmaceuticals’ chronic portfolio continues to do well, Kotak Institutional Equities said.

It expects branded markets to lead EBITDA margin expansion of 250 bps over FY2023-26E for the company.

“Demonstrating its strong turnaround capabilities yet again, Torrent Pharmaceuticals continues to successfully extract synergies from Curatio. Though the stock has come off from its peak, we await a better entry point. Given our expectation of EPS dilution over the medium term if Torrent Pharmaceuticals acquires Cipla, any potential deal remains the primary monitorable,” said the brokerage house.

It retained ‘Reduce’ rating on the stock with an unchanged target price of ₹1,950 per share.

Nuvama Institutional Equities 

Despite best-in-class metrics, Torrent Pharma still offers growth headroom while earnings are not under threat as domestic growth is ahead of market and OTC push is another tailwind given its portfolio; 20% PCPM increase potential; and Brazil growth at 12-13%.

“We welcome management’s initiatives to continuously optimise the cost structure as evident in foregoing the low-margin US business. Price erosion in the US seems to be stabilising and with tender wins in the EU, these businesses are unlikely to be a drag on TRP. We are reducing FY25/26E EPS by ~5% due to slower-than-expected US recovery and model in a slightly conservative 12% domestic growth,” said Nuvama Institutional Equities.

The brokerage retained ‘Buy’ call on the stock with an unchanged target price of ₹2,410 per share.

Antique Stock Broking

The continued improvement in gross margin showcases the strengths of the business model to leverage its brand and product mix, said Antique Stock Broking. It continues to remain constructive on Torrent Pharma’s domestic business and the Brazil franchise, with both geographies expected to grow higher than market growth rates.

It maintained a ‘Buy’ rating on the stock and raised the target price to ₹2,265 per share from ₹2,200 earlier.

At 9:50 am, Torrent Pharmaceuticals share price was trading 0.49% higher at ₹1,883.30 apiece on the BSE.