Buy Torrent Pharma – TP Rs.763 - Geojit BNP Paribas Financial Services Limited

Torrent Pharma is recommended to buy with a target price of Rs.763 over one year. The stock is currently traded in the range of Rs.545.

The company has been in an investment phase in the last two years for expanding the field force, entering in to new therapies for domestic market, product filing and capacity addition for export. Torrent's earnings growth over this period lagged peers and which explains its single digit P/E.

This investment phase seems nearing to end and the company has set ready to reap the benefits.

Torrent's early mover advantage in Latin America, differentiated product filings in the US and new launches in emerging markets will drive export growth.

Strong positioning in the high-margin, brand-sticky chronic business should help revive the domestic business despite competitive pressure.

It has been projected 20% sales growth over FY11-14.

Earnings are estimated to grow at a robust 28% CAGR over FY11-14. Given strong earnings momentum, it seems that Torrent deserves to trade at 12 multiple one-year forward earnings (9.5x currently), which gives a target price of Rs. 763 over one year.

Higher-than-expected sales impact from the pharma pricing policy and delay in key product launches are key risks.

Source : Equity Bulls

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