Edelweiss Star for the week is Torrent Pharmaceuticals Ltd,
a leading player in branded generics space in India and Brazil. Domestic formulations is the largest segment constituting 38% of FY10 sales. TORPHA is second largest domestic player in chronic segments (CNS - Central nervous system, CV - Cardiovascular and anti-diabetic) which constitutes 70% of its portfolio. The company’s branded generics business in Brazil is the second largest segment and contributes 16% of total sales in FY10 and is one of the largest operations by an Indian company in this crucial market. The company also has contract manufacturing business with Novo Nordisk for supply of insulin.
Torrent Pharmaceuticals’ (TORPHA) focus on branded formulations is a source of strength, lending higher growth and margins to its overall business. Domestic formulations growth, sizeable product pipeline in Brazil, and Mexico expansion will drive 20% CAGR in branded formulations over FY09-12E. Domestic formulation will be the key driver of business growth in medium term, aided by 45% increase in field force and expansion into new therapeutic areas.
On our FY11E and FY12E estimates, the stock currently is trading at a P/E 15.2x and EV/EBITDA of 10.5x on FY11E basis and at a P/E of 12.2x and EV/EBITDA of 8.6x on FY12E basis. Given these attractive valuations and its growth prospects, we believe the stock offers upside potential in the near term
