Bullish indicating open at $55-$60, IPO prices at $37
On Monday, JPMorgan analyst updated the financial outlook for Torrent Pharma (TRP:IN), increasing the price target to INR 3,700 from the previous INR 3,400, while keeping a Neutral rating on the stock. The adjustment reflects a revised valuation timeline and earnings expectations.
Torrent Pharma's third-quarter revenue fell short of JPMorgan's projections by 4%, as robust growth in India, which saw a 12% year-over-year increase, was countered by weaker performance in other markets. Challenges included currency depreciation in Brazil, operational disruptions in the Contract Manufacturing Organization (CMO) segment, and a lack of new product launches in the United States.
Despite revenue setbacks, the company's EBITDA margins remained steady at 32.5%, aligning with both consensus and JPMorgan's estimates. The Indian market was a standout for Torrent, outpacing the Indian Pharmaceutical (TADAWUL:2070) Market (IPM) by approximately 400 basis points, fueled by strong sales in the chronic care division.
Torrent Pharma reaffirmed its commitment to enhancing annual margins by 50 to 100 basis points, targeting an EBITDA margin around 32.5% for the fiscal year 2025. The company also expressed optimism about its prospects in the GLP-1 diabetes treatment arena, planning to be one of the initial entrants in India and Brazil with the launch of Semaglutide. Given Torrent's recent successes with anti-diabetes products, the company anticipates capturing a significant market share in India.
JPMorgan appreciates Torrent Pharma's consistent and robust growth within the Indian market. However, the firm suggests potential investors consider more favorable entry points before taking a constructive position on the stock. The valuation of Torrent Pharma, trading at 26 times and 22 times its estimated EV/EBITDA for fiscal years 2026 and 2027, respectively, is comparable to peer Mankind Pharma.
In light of the lower-than-expected revenues, JPMorgan has revised its EBITDA forecasts for the fiscal years 2025, 2026, and 2027 downward by 3%, 4%, and 4%, respectively. The new price target of INR 3,700 is based on a multiple of 25 times EV/EBITDA, projected for March 2026, a shift from the previous September 2025 basis. The Neutral rating indicates a cautious stance on the stock's current valuation.
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