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Torrent Pharma: Price Erosion in US and GST Impact in Domestic Markets Impacts Profitability - Views on News from Equitymaster
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  • Aug 17, 2017 - Torrent Pharma: Price Erosion in US and GST Impact in Domestic Markets Impacts Profitability

Torrent Pharma: Price Erosion in US and GST Impact in Domestic Markets Impacts Profitability
Aug 17, 2017

Torrent Pharmaceuticals has announced its June quarter (1QFY18) results. The company has reported a decline of 11.4% YoY in sales and 35.6% YoY decrease in net profits. Here is our analysis of the results.

Performance summary
  • Topline declined by 11.4% YoY during the quarter. This was largely due to higher base in Q1 FY18 for its key drug (Abilify). Since April 2016, four new players entered the market leading to sharp erosion in the pricing. US business for the quarter was down by 37% YoY.
  • India business declined by 9% YoY in Q1. This was mainly due to the GST implementation which has led to reduction in trade inventory across the sector.
  • Revenue growth YoY for Brazil in INR terms stood at 8% for the quarter.
  • German market witnessed growth of 8% YoY for the quarter.
  • US price erosion led to a decrease in EBITDA margins. EBITDA margins stood at 21.6% for the quarter as compared to 28.2% a year ago.
  • As a result, Net profits also declined by 35.6%

    Financial performance: A snapshot
    (Rs m) 1QFY17 1QFY18 Change
    Net sales 15,130 13,480 -10.9%
    Other operating income 380 260 -31.6%
    Revenue from operations 15,510 13,740 -11.4%
    Expenditure 11,140 10,770 -3.3%
    Operating profit (EBDITA) 4,370 2,970 -32.0%
    EBDITA margin (%) 28.2% 21.6%  
    Other income 260.0 1,050.0 303.8%
    Interest (net) 490.0 560.0 14.3%
    Depreciation 680.0 800.0 17.6%
    Profit before tax 3,460 2,660 -23.1%
    Exceptional Items 0 0  
    Tax 540 780 44.4%
    Minority Interest 0 0  
    Profit after tax/(loss) 2,920 1,880 -35.6%
    Net profit margin (%) 19.3% 13.9%  
    No. of shares (m)   170  
    Diluted earnings per share (Rs)   48.97  
    Price to earnings ratio (x)*   26.9  

    *based on trailing 12 months earnings


    Business Mix
    (Rs m) 1QFY17 1QFY18 Change
    Domestic Formulations 5,100 4,640 -9.0%
    (% of revenues) 32.9% 33.8%  
    Export Formulations 9,020 7,780 -13.7%
    (% of revenues) 58.2% 56.6%  
    Others (Including contract Mfg.) 1,390 1,320 -5.0%
    (% of revenues) 9.0% 9.6%  
    Total 15,510 13,740 -11.4%

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