Torrent Pharma bucked the market trend and closed 1% higher in yesterday’s trade with ~4x its average 2-week volumes.
We believe the buying was driven by the latest weakness in the stock witnessed post a gloomy 4Q. Notwithstanding the weak 4Q, we remain positive on Torrent given its inherent domestic strength, expanding presence in LatAm and potential synergies from Elder acquisition.
Further, scale up in Dahej facility, US sales ramp up would boost operating margins as fixed costs come down. Limited competition products such as Abilify (Apr-15), Nexium (FY16E), Crestor (July-16), Benicar (Apr-17) and Exforge (Dec- 17) provide high growth visibility in the US. We forecast Torrent to report 17%/23% CAGR for sales and APAT respectively over FY15-17E with steady improvement in margins at ~24-25%.
Thus, we recommend a BUY on the stock with a Target Price of Rs.1,400.
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