CLSA sees 20% upside in Torrent Pharma's shares

Mumbai: Global brokerage CLSA sees 20% upside in Torrent Pharma shares on the back of strong execution in branded markets and attractive valuations.
The brokerage has a target price of Rs 1,640. On Wednesday, the stock ended up 0.4% at Rs 1,366.50 on the BSE.

CLSA said Torrent has made continued progress in its key branded generic markets of India and Brazil, which collectively account for half of its revenues.
"In India, Torrent has outperformed market growth in major therapy areas, which has led to strong improvement in field force productivity, whereas portfolio realignment has enabled it to improve profitability in Brazil," said CLSA in a note to clients.

Moreover, valuations are attractive as highest earnings growth visibility among peers.

On a 12-month trailing basis, the stock is trading at a price-to-earnings ratio of 26.74 times.

"We expect 63% of the incremental earnings growth over FY17-19CL to come from India and Brazil. This provides strong earnings growth visibility for the company," said CLSA.

Although branded markets execution has been strong, CLSA sees scope for improvement in execution in the US.

"We expect capacity issues to get resolved as the new plant in Indrad is ramping up and new launches with higher complexity should help improve its negotiation power in the USA," said CLSA.