Torrent Pharma Ltd


(Anupam) #208

Sales cagr 3 Years:19.95%,TTM:32.89%
Profit cagr 3 Years:31.09%, TTM:88.44%
ROE 3 Years:35.92%, TTM:33.67%

There is a sharp jump in sales, margin & profit for torrent pharma. With a standalone PE of 15 and consolidated PE of 18, it looks like a value buy.


(Hitesh Patel) #209

anupam,

I see in a lot of your posts that you tend to rely a lot on data and then prounounce your judgement. While that could be one of the approaches to investing, I feel its a very crude way to look at things. If only investing were that simple.:grinning:

Basically what one needs to do is to try and look into the future and make an educated guess which could have some logic and which could reach close to an approximate value of future earnings. And that would need for you to take into account the quality of business, management, sectoral prospects or in case of companies getting windfalls (like torrent and alembic), it becomes much more important to look at various aspects of the company itself and try to estimate what future earnings could be.

Both alembic and torrent are extensively covered by brokerages and most of them have similar kind of projections but different kind of recommendations. That should tell us something about the thought process of different people.


(Anupam) #210

Hitesh - correct observation and nicely put across. I am working towards what you have rightly pointed out.I have started investing 3 months back. My 1st objective is NO to trading. 2nd is fundamental analysis…currently doing. 3rd will be valuation, 4th will be future predication and 5th capital allocation and portfolio management. However while I make a slow and steady transition, I for sure will be inclined on data based analysis. Even if qualitative futuristic predication needs to be made , I will design some data based model for the same :slightly_smiling:


(Nishant Kandoi) #211

Hi Anupam,
We are almost on the same boat, just that I have twice more experience as you that is 6 months! :smiley:
Regarding your aim to construct data based model, I was also thinking about the same taking into consideration what Hitesh Ji mentioned about the sectoral aspects, windfalls and management quality.
I have been looking at the stocks like balls suspended in a moving vertical channel of liquid (market) up at a constant rate (market cagr). The balls having a relatively lighter densities (better companies) would try to move up faster relative to the liquid and vice versa. Then there would be random shocks to the vertical channel from time to time (like windfalls). The fragile balls will break in such randomness whereas the antifragile balls (maybe Alembic and torrent in this case) would gain and move up faster from such randomness. It is this relative density and the ability to make use of the random shocks which makes some companies awesome.
Another thing I have been working on is to analyze how differently companies from a same sector move. For example, if sun pharma moves up x times in next 7-8 years, would companies like alembic and torrent have the capacity to move 2.5x-4x relative to it?

disc: invested in torrent and alembic.


(GSApte) #212

@amishra,

I agree with your emphasis on data analysis - which is largely based on past 5-10 years data, rather than fully relying on future outlook and earnings projections.

The book - “Intelligent Investor” at various places gives importance to current and past P/E, P/B, EV/EBITDA multiples and historic valuations and suggests to derive “margin of safety” based on that. While this approach looks good for value investing and some people believe that it is not for Growth investing, in my opinion, Only value investing works in long term. Since we can not accurately predict future earnings, we have to reply on current valuations more, while buying the stock. I have used value investing more successfully than growth investing in past 4-5 years and have managed to generate close to 20% CAGR or even more till Dec 2015.

Your analysis is much more deeper than most of the other investors and thought of adding my opinion.

Coming back to valuations of Torrent Pharma, I would like to buy more closer to P/E of <= 14 levels, thought I have bought at P/E of 17-18. Due to its uncertain revenue stream in FY16-17, I would be more cautious at current levels. It is becoming closer to a value buy now in my humble opinion and any further correction of 5-10% would make it a value buy.


(Rejinoldo) #213

@hitesh2710 hitesh bhai , y is torrent discounted so much by the mkt? ur thoughts … i think its available 10 times fy16 earning … i dont know much abt pharma … trying to learn …


(Hitesh Patel) #214

FY 16 is a year where torrent has got a windfall gain from abilify. that opportunity will be diluted to a large extent for fy 17. So one needs to guess what torrent’s revenues and profits would be for fy 17 and take a call on valuations.

Till now its a black box and I dont think people will have much idea till q1 fy 17 results will be out. At most domestic business projections can be made with some accuracy while the US biz would be difficult to predict.

Having said that I remain bullish on the company’s prospects having invested in it since before q1 fy 16 results.


(suhas ) #215

every pharma company investor must watch . we all part of this.
https://www.youtube.com/watch?v=ASBeOZlujSw


(Raj) #216

Those who know industrial climate in India, are aware that this is true to all industries in India not pharma specific. The environmental agencies are weak and corrupt and hence issues are there. The environmental norms needs to be tightened and this is not a problem which can’t be taken care.
Btw…many times such news are exaggerated and planted by lobbies who are threatened by the competition. So read such articles/news with a pinch of salt.


#217

Torrent Pharma : Consolidated Highlights

Consolidated net sales for the year ended March 2015 increased by 13.6 per cent to Rs.4,585 crore from Rs.4,036 crore in the previous year.

Net profit by 13.1 per cent to Rs.751 crore from Rs.664 crore.
Domestic sales went up by 28.7 per cent to Rs.1,882 crore from Rs.1,462 crore and contributed 41 per cent of its total net sales.

International sales moved up by 5 per cent to Rs.2,711 crore from Rs.2,581 crore and contributed 59 per cent to its net sales.

For the nine months ended December 2015
Reserves & surplus Rs.2,406 crore.
Net sales up by 46.5 per cent to Rs.5,056 crore from Rs.3,451 crore in the corresponding period of last year
Net profit went up by 142 per cent to Rs.1,500 crore from Rs.621 crore
Domestic sales increased by 20 per cent to Rs.1,701 crore from Rs.1,418 crore
International sales moved up by 65 per cent to Rs.3,366 crore from Rs.2,039 crore.
EPS for the nine months worked out to Rs.88.62 as compared to Rs.36.67 in the last period.

Sales in US increased to 7.2 per cent to Rs.832 crore from Rs.776 crore in the previous year. The lower growth in US is due to higher revenues from one of the new launches in previous year. Adjusting for oneoffs, revenue grew by 54 per cent. Its sales in Germany increased by 8 per cent to Rs.620 crore. Dossier out licensing and product supply business continues to be an important part of the Europe business and its revenues reached at Rs.221 crore. Its sales in Brazil increased by 14 per cent to Rs.606 crore and it has approvals of 40 products and 20 products are in pending for approvals.

The income from contract manufacturing segment declined to Rs.295 crore during 2014-15 from Rs.393 crore in the previous year, a major portion of which is from manufacture of human insulin.

Focus mainly on CNS, cardiology, diabetes, gastrointestinal and dermatology.The company entered the nephrology market through a new division. It entered into an exclusive licensing agreement with Reliance Life Sciences for marketing three biosimilars in India viz., Rituximab, Adalimumab and Cetuximab.

The company has set up a manufacturing facility for Oyster Shell powder (natural calcium source), a API for manufacture of Shelcal brand. Further it is setting up an integrated manufacturing facility for drug substances and drug products (API and formulations) in oncology for international market. Torrent is also investing in expansion of its Sikkim facility.

Disc : Invested


(Prabhakar) #218

Torrent Pharmaceuticals: A company on fast track

Torrent Pharmaceuticals, a Rs.4,650 crore Ahmedabad based pharma giant, is moving ahead vigorously with expansion and higher investments in R&D. The company is focusing on highly regulated markets and has invested Rs.650 crore in new facility at Dahej in Gujarat. The first phase of new facility was commissioned during November 2015 for the manufacturing of formulations and APIs.

The company added installed capacity of 7,500 million tablets/capsules and 25 MT APIs per annum This plant will export products to highly regulated markets like US, Brazil, Germany, etc. The construction of phase II will commence soon and once commissioned, the total capacity will increase to about 14,000 million tablets/capsules and 80 MT API per year. With the help of 600 scientists, Torrent is well set to established its presence in highly regulated markets in the next couple of years.

Currently, Torrent Pharma’s Rs.5 share is moving in the range of Rs.1,300-1,325 on BSE with market capitalisation of over Rs.22,000 crore. Torrent scrip touched to its yearly high level at Rs.1,720 during September 2015 as against its lowest of Rs.1,033 during February 2015. The promoters are holding 71.25 per cent and remaining is with the public including banks, mutual funds, financial institutions, etc. The company declared hefty interim dividend of Rs.20 per share for a share of Rs.5 each (400 per cent) recently.

The impressive growth in top line and bottom line during the nine months ended December 2015 and an announcement of hefty interim dividend have given necessary push to share price despite depressed investors mood in the stock markets. As against the equity capital of Rs.84.62 crore, its reserves & surplus amounted to Rs.2,406 crore.

For the nine months ended December 2015, Torrent Pharma’s consolidated net sales increased by 46.5 per cent to Rs.5,056 crore from Rs.3,451 crore in the corresponding period of last year. Its net profit went up sharply by 142 per cent to Rs.1,500 crore from Rs.621 crore. Its domestic sales increased by 20 per cent to Rs.1,701 crore from Rs.1,418 crore and international sales moved up by 65 per cent to Rs.3,366 crore from Rs.2,039 crore. EPS for the nine months worked out to Rs.88.62 as compared to Rs.36.67 in the last period.

The company has set up a manufacturing facility for Oyster Shell powder (natural calcium source), a API for manufacture of Shelcal brand. Further it is setting up an integrated manufacturing facility for drug substances and drug products (API and formulations) in oncology for international market. Torrent is also investing in expansion of its Sikkim facility.

Torrent is focusing mainly on CNS, cardiology, diabetes, gastrointestinal and dermatology. With integration of acquired Elder Pharma’s domestic formulation business has assisted well. It is expanding the portfolio in newly entered segments and accelerating performance in the acute segment. The company entered the nephrology market through a new division. It entered into an exclusive licensing agreement with Reliance Life Sciences for marketing three biosimilars in India viz., Rituximab, Adalimumab and Cetuximab.

The company’s consolidated net sales for the year ended March 2015 increased by 13.6 per cent to Rs.4,585 crore from Rs.4,036 crore in the previous year and net profit by 13.1 per cent to Rs.751 crore from Rs.664 crore. Domestic sales went up by 28.7 per cent to Rs.1,882 crore from Rs.1,462 crore and contributed 41 per cent of its total net sales. Its international sales moved up by 5 per cent to Rs.2,711 crore from Rs.2,581 crore and contributed 59 per cent to its net sales. The income from contract manufacturing segment declined to Rs.295 crore during 2014-15 from Rs.393 crore in the previous year, a major portion of which is from manufacture of human insulin.

The company’s sales in US increased to 7.2 per cent to Rs.832 crore from Rs.776 crore in the previous year. The lower growth in US is due to higher revenues from one of the new launches in previous year. Adjusting for oneoffs, revenue grew by 54 per cent. Its sales in Germany increased by 8 per cent to Rs.620 crore. Dossier out licensing and product supply business continues to be an important part of the Europe business and its revenues reached at Rs.221 crore. Its sales in Brazil increased by 14 per cent to Rs.606 crore and it has approvals of 40 products and 20 products are in pending for approvals.

Its R&D expenditure worked out to 4.8 per cent of turnover at Rs.163.57 crore during 2014-15 as against Rs.137.46 crore in the previous year. The company has initiated investment in the areas like oncology, dermatology and opthalmic. It is now planning to spend 6-8 per cent of sales on R&D activities. It received 6 ANDA approval from US FDA and it filed 73 ANDAs and 26 DMFs in the US. It also filed 56 new product dossiers and 24 DMF in the EU. Torrent filed 818 patents for NDDS technology, drug discovery projects and innovative process of API & formulation for various regions and it has been granted 325 patents. The company has initiated new discovery programmes in chronic obstructive pulmonary disease and inflammatory bowel disease.

The company has 17 subsidiaries as at the end of March 2015. It has completed acquisition of domestic branded formulation business of Elder Pharmaceuticals in India and Nepal for a consideration of Rs.2,004 crore during 2014-15 and strengthened its position in women health, pain management, wound care and neutraceuticals therapeutic segments. Further, it entered agreement to acquired 100 per cent stake in Zyg Pharma Pvt Ltd, which engaged in manufacturing various dermatological formulations like creams, ointments, gels, lotions and solutions.

Due to these acquisitions, its fixed assets increased by 148 per cent during 2014-15 to Rs.3,495 crore from Rs.1,409 crore in the previous year. Total borrowings moved up by 162 per cent to Rs.2,504 crore from Rs.954 crore. Its interest burden jumped up by 196 per cent to Rs.175 crore from Rs.59 crore and its depreciation provision increased by 120 per cent to Rs.191 crore from Rs.87 crore.

Based on the first nine months of financial performance and commissioning of new project, Torrent is set to achieve top line growth of 40-45 per cent for the year 2015-16 and net profit growth of around 150 per cent to Rs.2,000 crore, which is far better than the Indian pharma segment. This is better opportunity for investors to increase their investments in Torrent at market price level of around Rs.1,350 on BSE.

http://www.pharmabiz.com/NewsDetails.aspx?aid=93670&sid=1

Disc : Invested


(Rohit Ojha) #219

Board to consider second interim dividend on 9th March.
Expectation of Rs. 8 dividend


(Hitesh Patel) #220

I dont understand why they need to declare a second interim dividend in the middle of nowhere. The right time was to declare it when some weeks back they declared interim dividend along with q3 results. Or else it could have been announced with q4 results. Dividends are always welcome though :relaxed:


(Rakesh ) #221

Hiteshji,
This might be due to budget

http://economictimes.indiatimes.com/news/economy/finance/budget-2016-with-10-tax-on-dividend-income-rush-of-interim-payouts-likely/articleshow/51217301.cms


(LuckyLuke) #222

I have been patiently waiting to enter Torrent Pharma to make it a significant chunk of my portfolio. Though it is already corrected & could be considered at attractive valuation but I am planning to wait for some more months. Meanwhile I recently found that someone named : DINESHCHANDRA NANCHAND MODI has picked up 1.13% of shares in public domain in the last quarter. I tried to google this name but did not find any clues.

Does anyone know this person?


(Ankit Gupta) #223

I think lot of companies have announced interim dividend recently instead of final dividend. This is primarily to do with the 10% DDT applicable from April 1 on recipients of more than 10 lakh of dividends. Makes sense also since anyway a company like Torrent which has a stated dividend policy of 30% of PAT will pay dividend after Q4 results are announced. The promoters who hold 75% in the company will save on the tax.


(Balajirp) #224

Dr Vijay Malik has written a detailed analysis on Torrent Pharma. Check it out here…


(Rohit Ojha) #225

Torrent Pharmaceuticals Ltd has informed BSE that the Board of Directors of the Company at its meeting held on March 09, 2016,
has approved the payment of a special dividend as second interim dividend of Rs.15 (300%) per equity share of Rs. 5/- each fully paid up.

Higher than expected dividend from Torrent.


(Aman Vij) #226

Not sure if it’s the optimum use of Free cash flow. Shouldn’t they use the excess cash to reduce the debt. Besides it also gives the wrong signal of company not able to find opportunities to deploy capital in near term.


(harshbhandari) #227

It is done to avoid taxation. Promoters will not have to pay tax on their dividend income (which will be substantial amount).