6 November 2014
2QFY15 Results Update | Sector: Healthcare
Torrent Pharmaceuticals
BSE SENSEX
27,916
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel.Per (%)
S&P CNX
8,338
TRP IN
169.2
940/452
-2/32/1
CMP: INR922
n
TP: INR1068
Upgrade to Buy
M.Cap. (INR b) / (USD b) 156.1/2.5
Financials & Valuation (INR Million)
Y/E Mar
Net Sales
EBITDA
Adj PAT
EPS (INR)
Gr. (%)
BV/Sh.INR
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
2015E 2016E 2017E
48,550 56,733 65,175
12,117 14,260 16,809
7,650
40.8
29
144
31.8
29.1
22.6
6.4
7,934
46.9
15
174
29.4
24.1
19.7
5.3
9,998
59.1
26
213
30.5
26.8
15.6
4.3
Revenues for 2QFY15 grew 25% YoY to INR12.2b (est. INR13.4b). EBITDA grew 53%
YoY to INR2.7b (miss of 15%), with EBITDA margins at 22.4% (est. 24%). Reported
PAT grew 75% YoY to INR1.9b (est. INR1.7b).
n
US posted 45% growth (miss of 30%) due to charge backs on account of
gCymbalta. Domestic business grew in line at 49% to INR4.4b with additional sales
of INR945 from Elder brands during this quarter. Core India business grew 17%
YoY, in line with est. Revenue growth in LatAm surprised us positively, while
growth in other markets was in line with estimates.
n
EBITDA margins at 22.4% were 160bp lower than est. Margins were largely
impacted by lower sales in US. PAT beat was largely driven by higher other income
(forex gain not quantified by the company) and lower tax rate
n
Concall highlights:
US growth is likely to get stabilized over the next few quarters,
8-10 new launches are expected in FY15. India to sustain above-industry growth
momentum led by improving MR productivity and contribution from Elder (price
increases/new launches). Growth in Brazil is also likely to sustain aided by strong
volume growth and contribution from institution and generic businesses. Europe
to see underline business growth 8-10%, led by few new launches and tenders.
Post the 2QFY15 results, we have broadly retained our EPS estimates for FY15-FY17.
We see operating leverage coming into play over the medium term particularly in
markets like US and Brazil. We expect growth momentum in India (ex Elder portfolio)
to continue while Brazil is expected to show stronger performance over the next few
quarters which should aid margin expansion. Performance of Elder brands is likely to
accelerate through price increases and new launches. We expect earnings growth in
FY17 to be very strong as Elder contribution turns positive. Over FY15-FY17, we expect
TRP to witness a core EPS CAGR of 23%. We upgrade the stock to Buy from Neutral
with a revised target price of INR1,068 (18x FY17E). Execution issues in India are a key
downside risk to our estimates
Alok Dalal
(Alok.Dalal@MotilalOswal.com);+91 22 3982 5584
Amey Chalke
(Amey.Chalke@MotilalOswal.com);+91 22 3982 5423
Investors are advised to refer through disclosures made at the end of the Research Report.

Torrent Pharmaceuticals
Key takeaways from the call
n
n
n
n
n
n
n
n
n
n
US:
Growth in constant currency was 49%. No ANDA was filed during this
quarter. Filing rate to pick up in 2HFY15. TRP received one ANDA approval in
2QFY15 for gMicardis and has maintained its guidance to launch 8-10 products
in FY15. Overall, It has received 50 ANDA approvals and has 21 pending filings
till date.
Abilify:
TRP is expected to launch gAbilify in Q1FY16. With large number of
players are expected to get approval for this product, company sees low single
digit market share for this product. There would be no at risk launch for the
company.
India:
Excluding Elder brands, India business grew 17% for this quarter.
Revenue contribution from the acquired business stood at INR945m, which will
continue to see higher growth for next few quarters. Overall business grew
49% to INR4.4b, led by accelerated growth in Gynecology, Nutraceuticals, Pain
management therapies. TRP also entered into new therapies like Dermatology
and Oncology. Going forward, TRP is expected to add 20+ new products in
Elder portfolio and take price increases for the core portfolio.
Brazil:
The company saw 28% growth in Brazil, compared to market growth of
6%. Growth has been led by volume growth for 3-4 key products where TRP
had taken voluntary price cuts. The company is also witnessing strong traction
in Institutional business. Nebivolol continues to do well with 27% market share
in Branded and 8% in Generic product. Management indicated that the pace of
approval at ANVISA is picking up and has seen some improvement in regulatory
environment. They are confident of demonstrating 15% growth in Brazil versus
market growth of 8-10%.
Europe:
On constant currency basis, business grew at 8%, led by German
market. Management has guided for 8-10% growth in European market.
ROW:
Business remains flat at INR970m during this quarter, affected by
discontinuation of business in non performing countries and currency
devaluation in Russia & CIS .
EBITDA margins:
Excluding the upside from gMicardis HCT, core EBITDA margin
expanded 3.3% YoY compared to our expectation of 0.6% increase. MR
productivity stands at INR4.2lac per month, showed 21% CAGR growth for last
5 years against revenue growth of 13-14% CAGR. Management aims to achieve
INR 8 Lac per month productivity in the longer run.
Outstanding hedges stand at USD300m at average rate of INR 63-64.
Capex guidance at INR 2-2.5b for FY15.
R&D costs
guided to be between 4-5% of sales.
Tax rate
guided to be around
MAT levels (20-21%).
6 November 2014
2

Torrent Pharmaceuticals
Exhibit 1: Geographical sales mix (INR m)
Particulars
Domestic Formulations
International
Latam
USA
Europe (Incl-Germany)
RoW, Russia & CIS
Contract Mfg
Others
Total
2QFY15
4,420
6,718
1,600
1,668
2,480
970
980
52
12,170
2QFY14
2,970
5,720
1,250
1,150
2,350
970
1,000
20
% YoY
48.8
17.4
28.0
45.0
5.5
0.0
-2.0
160.0
Source: Company
Exhibit 2: Base business to pick up
9,710
25.3
Source: Company
Exhibit 3: India sales recovering; growth faster-than-industry
India sales (INR m)
YoY growth (%)
48.8
12.3
3,120
1Q
9.6
2,970
2Q
FY14
14.9
2,970
3Q
17.4
2,560
4Q
12.8
3,520
1Q
4,420
2Q
4,632
3QE
FY15
4,157
4QE
56.0
62.4
Exhibit 4: Gross margins back to normal levels
Source: Company
Source: Company
Exhibit 5: EBITDA margins to stabilize
Exhibit 6: Key comments
n
n
n
n
Source: Company
Excluding Elder brands, India business grew 17% for
this quarter. Revenue contribution from the acquired
business stood at INR945m, which will continue to
see higher growth for next few quarters.
Brazil continues to recover faster than expected.
Europe grew at 8%, led by German market. New
launches and tender business would be the key
drivers for this business.
ROW remains flat at INR970m during this quarter,
affected by discontinuation of business in non
performing companies.
6 November 2014
3

Torrent Pharmaceuticals
Exhibit 7: Domestic sales growth led by Elder acqn. in FY15E
Exhibit 8: New launches to drive base business growth
as one-offs fall
Source: Company, MOSL
Source: Company, MOSL
Exhibit 9: Brazil expected to recover in FY15
Exhibit 10: Core EBITDA margins expected to improve
Source: Company, MOSL
Source: Company, MOSL
Exhibit 11: EPS growth led by Elder acqn. and recovery
in India & Brazil
Exhibit 12: Robust cash conversion cycle; but
increased leverage
Source: Company, MOSL
Source: Company, MOSL
6 November 2014
4

Torrent Pharmaceuticals
Valuation and
view
n
n
n
n
n
Post the 2QFY15 results, we have broadly retained our EPS estimates for FY15-
FY17. We see operating leverage coming into play over the medium term
particularly in markets like US and Brazil.
We expect growth momentum in India (ex Elder portfolio) to continue while
Brazil is expected to show stronger performance over the next few quarters
which should aid margin expansion.
Performance of Elder brands is likely to accelerate through price increases and
new launches.
We expect earnings growth in FY17 to be very strong as Elder contribution turns
positive.
Over FY15-FY17, we expect TRP to witness a core EPS CAGR of 23%. We upgrade
the stock to Buy from Neutral with a revised target price of INR1,068 (18x
FY17E). Execution issues in India are a key downside risk to our estimates.
6 November 2014
5

Torrent Pharmaceuticals
Torrent Pharmaceuticals: an investment profile
Company description
Torrent Pharma is one of the second tier Pharma
companies that is actively targeting the regulated
generics and semi-regulate markets. The company has
strong presence in domestic market with focus and
leadership in CVS and CNS segments. The company has
large presence in some of the key global markets like
Brazil and Germany while it is expanding its footprint in
key markets like US, Europe (excl. Germany) and RoW.
Key investment risks
n
n
Regulatory risk related to product approvals,
manufacturing cost and various laws across business
segments
Foreign exchange risk as around 50% revenues of
the company come from the export markets.
Valuation and view
n
Key investment arguments
n
n
n
Torrent derives its strength from being the leader in
some of the most lucrative and fastest growing
chronic therapy segments like CVS and CNS
In International business, it will grow profitable on
the back of presence in both generic and branded
markets.
The company has consistently delivered improving
financial performance, with increase in RoCE & RoE
Torrent's net debt-equity ratio has come down from
0.7x in FY07 to zero since FY11.
n
We value TRP at 18x FY17E EPS as there is a shift in
operating margins of the company. We add INR
9/share from Para IV opportunities.
We upgrade the stock to
Buy
from
Neutral.
Execution issues in India are a key downside risk to
our estimates.
Sector view
n
n
Recent developments
n
Regulated markets would remain the key sales and
profit drivers in the medium term. Japan is expected
to emerge as the next growth driver, particularly for
companies with a direct marketing presence.
We are overweight on companies that are towards
the end of the investment phase, with benefits
expected to start coming in from the next fiscal.
Concluded Elder Pharma deal; borrowed INR14b to
partly fund the transaction
Comparative valuations
Torrent Pharma
P/E (x)
FY15E
22.6
FY16E
19.7
P/BV (x)
FY15E
6.4
FY16E
5.3
EV/Sales (x)
FY15E
3.6
FY16E
3.0
EV/EBITDA (x) FY15E
14.4
FY16E
12.0
Glenmark
19.6
16.1
4.3
3.4
2.6
2.3
12.4
10.5
Cadila
22.2
18.3
4.9
4.1
2.8
2.4
16.0
13.0
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY15
FY16
40.8
46.9
Consensus
Forecast
43.5
49.2
Variation
(%)
-6.2
-4.6
Target price and recommendation
Current
Price (INR)
922
Target
Price (INR)
1068
Upside
(%)
15.8
Reco.
Buy
Shareholding pattern (%)
Sep-14
Promoter
DII
FII
Others
71.5
6.5
12.8
9.1
Jun-14
71.5
7.0
12.6
8.8
Sep-13
71.5
8.9
7.9
11.7
Stock performance (1-year)
Torrent Pharma
1,000
850
700
550
400
Oct-13
Jan-14
Apr-14
Jul-14
Oct-1
6
Sensex - Rebased
Note: FII Includes depository receipts
6 November 2014

Torrent Pharmaceuticals
Financials and valuations
Income statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
Margins (%)
2014
40,950
34
9,514
22.7
870
8,644
586
381
0
8,439
1,801
21.3
0
6,638
5,362
14
13
(INR Million)
2015E
48,550
19
12,117
24.9
1,950
10,167
1,900
1,510
0
9,777
2,127
21.8
0
7,650
6,901
29
14
2016E
56,733
17
14,260
24.7
2,347
11,913
2,320
450
0
10,043
2,109
21.0
0
7,934
7,934
15
14
2017E
65,175
15
16,809
25.4
2,523
14,286
2,130
500
0
12,656
2,658
21.0
0
9,998
9,998
26
15
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios (%)
Asset Turnover (x)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
2014
31.7
44.4
112.4
10.0
29.8
29.1
20.8
8.2
3.8
16.8
1.1
32.3
34.9
1.4
95.9
87.8
141.7
0.6
2015E
40.8
56.7
144.0
13.6
35.1
22.6
16.3
6.4
3.6
14.4
1.5
31.8
29.1
1.0
76.7
78.5
104.5
1.0
2016E
46.9
60.8
174.5
14.1
35.1
19.7
15.2
5.3
3.0
12.0
1.5
29.4
24.1
1.1
76.7
77.1
102.7
0.8
2017E
59.1
74.0
212.8
17.7
35.1
15.6
12.5
4.3
2.5
9.9
1.9
30.5
26.8
1.1
76.7
75.9
101.1
0.6
Balance sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
2014
846
18,178
19,024
11,418
-182
30,264
14,200
5,447
8,753
5,341
1,857
34,091
10,061
10,994
7,694
5,342
19,777
16,239
3,538
14,314
30,265
(INR Million)
2015E
846
23,527
24,374
25,418
275
50,070
38,036
7,058
30,978
3,171
1,857
33,442
10,473
10,225
6,868
5,876
19,376
13,946
5,430
14,065
50,070
2016E
2017E
846
846
28,677 35,166
29,523 36,012
23,418 21,418
275
275
53,219 57,708
41,078 44,600
9,405 11,928
31,673 32,672
2,085
1,543
1,857
1,857
39,375 46,269
12,201 13,768
12,124 13,897
8,587 11,495
6,463
7,110
21,771 24,632
16,242 18,324
5,528
6,308
17,605 21,638
53,220 57,708
E: MOSL Estimates
Cash flow statement
Y/E Mar
OP/(Loss) before Tax
Depreciation
Others
Interest
Direct Taxes Paid
(Inc)/Dec in Wkg Cap
CF from Op. Activity
(Inc)/Dec in FA & CWIP
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax)
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
2014
9,514
0
381
0
-2,239
-3,034
4,622
-3,904
-1,252
0
-5,156
423
4,388
-586
-1,980
2,245
1,711
6,270
7,980
(INR Million)
2015E
12,117
0
1,510
0
-1,670
-578
11,378
-21,665
0
0
-21,665
0
14,000
-1,900
-2,685
9,415
-872
7,694
6,822
2016E
14,260
0
450
0
-2,109
-1,820
10,781
-1,957
0
0
-1,957
0
-2,000
-2,320
-2,785
-7,104
1,719
6,868
8,587
2017E
16,809
0
500
0
-2,658
-1,125
13,526
-2,979
0
0
-2,979
0
-2,000
-2,130
-3,509
-7,639
2,908
8,587
11,495
6 November 2014
7

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Torrent
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Pharmaceuticals
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Contact : (+65)68189232
Contact : (+65) 68189233 / 65249115
Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931
For U.S.
For Singapore
Motilal Oswal Securities Ltd
6 November 2014
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
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