Torrent’s domestic revenues grew 11% y-o-y, in line with estimates, and 15% y-o-y, when adjusted for Covid delays. While overall revenues were slightly lower than estimates, tight cost control resulted in Ebitda at 6% higher than estimates, with adjusted PAT 29% higher than estimates. The run-up leaves limited room for upside. Downgrade a notch to ‘reduce’ (from ‘add’) and revise fair value to Rs 2,350/share.
The domestic formulations business had a strong quarter, growing at 11% yo-y, in line with our estimates, though, adjusting for delays in order dispatches, growth was higher at ~15%. US sales at $53 million (+$4 million vs KIE) had some benefit from stocking, though, while performances in Brazil (-4.4% y-o-y) and RoW countries (+15% y-o-y) were in line with our estimates. Germany had another poor quarter, declining 10% y-o-y, 13% lower than our estimates, due to implementation of revised SOPs at manufacturing units (second quarter in a row). Tight cost control (SG&A:-8.4% vs KIE) and lower R&D resulted in Ebitda margins expanding to 28.2% (+230bps vs KIE), and Ebitda print 6% higher than our estimates, and PBT 12% higher than our estimates, helped by lower interest cost, and despite lower other income. A one-time tax reversal of Rs 53 crore further boosted PAT, and even adjusting for tax benefits, PAT was 29% higher than estimates. Working capital rose slightly due to geographic mix (declining Germany contribution), as well as delays in collection in lockdown, though, Torrent is firmly on track to reduce > Rs 1,000-crore debt in FY21. Adjusting for amortisation (~Rs 17/share post-tax), it trades at ~25X FY22E EPS or 16X FY22E EV/Ebitda. We largely retain our numbers.