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Torrent Pharma: US Price Erosion And Decline in Brazilian Market Lead to Muted Growth - Views on News from Equitymaster

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  • Nov 10, 2017 - Torrent Pharma: US Price Erosion And Decline in Brazilian Market Lead to Muted Growth

Torrent Pharma: US Price Erosion And Decline in Brazilian Market Lead to Muted Growth
Nov 10, 2017

Torrent Pharmaceuticals has announced its September quarter (2QFY18) results. The company has reported a decline of 0.4% YoY in sales and 1.4% YoY decline in net profits. Here is our analysis of the results.

Performance summary
  • Topline declined by 0.4% YoY during the quarter. This was largely due to sharp price erosion in the US markets. US business for the quarter was down by 21% YoY.
  • India business grew by 22% YoY in Q2. With regards to its domestic business, the company announced the acquisition of Unichem's branded formulation business of India and Nepal.
  • Revenue growth YoY for Brazil in INR terms declined by 24% YoY for the quarter.
  • German market witnessed growth of 19% YoY for the quarter.
  • EBITDA margins stood at 23% for the quarter as compared to 23.1% a year ago mainly due to price erosion in US markets.
  • As a result, Net profits also declined by 1.4%

    Financial performance: A snapshot
    (Rs m) 2QFY17 2QFY18 Change 1HFY17 1HFY18 Change
    Net sales 14,060 14,010 -0.4% 29,190 27,490 -5.8%
    Other operating income 230 280 21.7% 610 540 -11.5%
    Revenue from operations (net) 14,290 14,290 0.0% 29,800 28,030 -5.9%
    Expenditure 10,990 11,000 0.1% 22,130 21,770 -1.6%
    Operating profit (EBDITA) 3,300 3,290 -0.3% 7,670 6,260 -18.4%
    EBDITA margin (%) 23.1% 23.0%   25.7% 22.3%  
    Other income 430.0 780.0 81.4% 690 1,830 165.2%
    Interest (net) 510.0 510.0 0.0% 1,000 1,070 7.0%
    Depreciation 690.0 840.0 21.7% 1,370 1,640 19.7%
    Profit before tax 2,530 2,720 7.5% 5,990 5,380 -10.2%
    Exceptional Items 0 0   0 0  
    Tax 460 680 47.8% 1,000 1,460 46.0%
    Minority Interest 0 0   0 0  
    Profit after tax/(loss) 2,070 2,040 -1.4% 4,990 3,920 -21.4%
    Net profit margin (%) 14.7% 14.6%   17.1% 14.3%  
    No. of shares (m)         169.2  
    Diluted earnings per share (Rs)         48.9  
    Price to earnings ratio (x)*         25.3  

    *based on trailing 12 months earnings


    Business Mix
    (Rs m) 2QFY17 2QFY18 Change
    India 4,960 6,070 22.4%
    US 3,220 2,550 -20.8%
    Brazil 1,570 1,200 -23.6%
    Germany 1,860 2,210 18.8%
    Other 1,260 1,350 7.1%
    Others (Incl Contact Mfg) 1,420 910 -35.9%
    Total 14,290 14,290 0.0%
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