Torrent Pharmaceuticals Ltd Quarterly Results Q3 FY 25 stock analysis

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Sector Outlook: Positive

Steady quarter despite subdued Brazilian business performance

Torrent Pharma reported a revenue of Rs 28,090 million in Q3FY25, showing a 2.8% YoY increase but a 2.8% decline QoQ, slightly beating market expectations of Rs 27,890 million. Domestic revenue grew by 11.7% YoY, driven by strong performance in focus therapies. According to AIOCD data, the company grew faster than the Indian Pharmaceutical Market (IPM), with a 14% YoY growth in its chronic business, compared to 10% YoY IPM growth. This was supported by a recovery in its cardiac division and new launches in the anti-diabetes segment.

Germany sales rose 4.4% due to new tender wins and improved execution of existing tenders. However, Brazil sales declined 6.7% YoY due to the depreciation of the Brazilian Real (BRL). The US business dipped slightly by 1.1% YoY but has shown stable sequential performance.

EBITDA increased by 5.2% YoY to Rs 9,140 million, with margins at 32.5%, an improvement of 73 bps YoY and 4bps QoQ, helped by higher gross margins of 76%. Profit After Tax (PAT) was Rs 5,030 million, up 13.5% YoY and 11% QoQ, with PAT margins rising to 17.9% from 15.7% in the prior quarter. The company’s Board declared an interim dividend of Rs 26 per share, which is 520% of its face value.

Key Concall Highlights

Indian Business Outlook:

1. 1. Domestic revenue grew by outperforming focus therapies, with Torrent’s growth at 12% compared to IPM growth of 8% in Q3FY25.
  2. Growth drivers included 2.5% from new product launches, 1.5% from volume, and the rest from price hikes.
  3. The company expects to continue outperforming IPM, focusing on market share improvement, new launches, enhancing productivity in expanded divisions, and scaling the consumer health business.

Field Force Expansion:

1. 1. The field force increased to 6,200 from 6,000 in the previous quarter.
  2. This expansion supports new product launches, extends territorial reach, and helps gain market share in untapped areas.

Insulin Facility:

1. 1. The insulin facility was temporarily shut for maintenance in August, leading to no sales in Q3FY25.
  2. Insulin CMO sales will resume dispatches in January 2025, with additional business expected in Q4FY25 due to spillover.

GLP-1 Development:

1. 1. Torrent plans to be an early entrant in the GLP-1 market post-expiry in March 2026, with clinical trials underway.
  2. Manufacturing will be outsourced through partners, though there are concerns about how demand will develop.

Regulatory Updates:

1. 1. USFDA issued an EIR with a VAI (Voluntary Action Indicated) classification for the Pithampur, Madhya Pradesh manufacturing facility.

Brazilian Business Outlook:

1. 1. The Brazil market is expected to grow in the mid-teens.
  2. Torrent has 20 products under ANVISA review and plans to launch 2-3 products per franchise in the branded business to build large brands.
  3. The focus is on improving productivity of existing medical representatives (MRs) and entering new therapies.

German Business Outlook:

1. 1. Germany showed stable sequential recovery, driven by new tender wins.
  2. The company expects growth momentum to continue with additional tender opportunities.

US Business Outlook:

1. No significant ramp-up in US sales is expected.
2. Torrent aims to reduce losses gradually and make the US business profitable within the next three years.

Valuation and Outlook

Torrent Pharma reported solid revenue growth during the quarter, driven by its domestic business (56% of sales), supported by strong performance from new product launches, expanded field force, and growth in the consumer health segment. The company is focusing on increasing its market share in chronic therapies and improving the efficiency of its expanded divisions and regions. The Curatio portfolio is expected to deliver strong growth with improved margins.

The Brazilian business (10% of sales) grew 10% YoY in constant currency terms but declined 7% in INR terms due to the depreciation of the Brazilian Real. The currency impact is likely to continue for 1-2 more quarters, but growth will be driven by higher price increases (effective April 2025) and new product launches.

Germany’s business (10% of sales) saw revenue growth, supported by new tender wins, which will begin contributing to sales from Q2FY26. The US business remains a drag on profitability but is expected to turn positive by FY26.

Looking ahead, Torrent Pharma is well-positioned for steady growth, backed by its strong branded franchise, increased productivity from its medical representatives, growth in Brazil, and expansion into the consumer wellness segment. The company also plans a gradual recovery in the US generics business and expects steady margins in the coming years, aided by new launches and additional tender wins in Germany.