Motilal Pharma Report
Motilal Pharma Report
Motilal Pharma Report
Update | Healthcare
Torrent Pharma
BSE SENSEX S&P CNX
57,108 17,007 CMP: INR 1,534 TP: INR1,500 (-2%) Neutral
Curatio acquisition strengthens derma portfolio
Deal at expensive valuation
Torrent Pharma (TRP) is set to acquire Curatio Healthcare (Curatio) for
Stock Info enterprise value of INR19b.
Bloomberg TRP IN While the acquisition will help with the company’s portfolio expansion and
Equity Shares (m) 338
widen its reach to dermatologists/paediatricians, the deal valuation is
M.Cap.(INRb)/(USDb) 519 / 6.4
expensive at 6.8x EV/ FY23 sales, 22.4x EV/FY23 EBITDA basis.
52-Week Range (INR) 1643 / 1236
1, 6, 12 Rel. Per (%) 2/12/4 We reduce our EPS estimate by 2% for FY24 to factor in the Curatio
12M Avg Val (INR M) 607 acquisition. We value TRP at 26x 12M forward earnings to arrive at a price
Free float (%) 28.8 target of INR1500. Considering its limited upside potential, we reiterate our
Neutral stance on the stock.
Financials Snapshot (INR b)
Y/E MARCH FY22 FY23E FY24E Deal background
Sales 85.1 96.5 111.0 TRP has entered into a definitive agreement to acquire 100% of Curatio for
EBITDA 24.3 28.9 35.1 INR20b. Considering Curatio’s cash and cash equivalent of INR1.15b on its
Adj. PAT 11.6 14.5 18.3
EBIT Margin (%) 20.8 22.7 24.5
balance sheet, the enterprise value would be INR19b.
Cons. Adj. EPS (INR) 34.3 42.8 54.0 The transaction is expected to be completed within a month.
EPS Gr. (%) -8.4 24.7 26.2 The historical sales of Curatio Healthcare has been INR1.8b/INR1.7b/INR2.2b
BV/Sh. (INR) 175.9 217.9 252.4 for FY20/FY21/FY22.
Ratios
Net D:E 0.7 0.6 0.3 Call takeaways:
RoE (%) 19.7 21.7 23.0 While ~15-20% of Curatio’s sales are over the counter, 80-85% of its sales are
RoCE (%) 14.9 14.9 17.3
Payout (%) 54.0 35.5 36.1
prescription based.
Valuations The EBITDA margin of Curatio is ~29%. TRP does not expect regulatory
P/E (x) 44.7 35.9 28.4 agencies to enforce any cap on price hikes on the Curatio portfolio.
EV/EBITDA (x) 22.9 19.2 15.0 Over the past 12 months, TRP has recorded sales of INR1.2b from its
Div. Yield (%) 0.7 0.8 1.1
FCF Yield (%) 3.1 0.8 6.3
dermatology segment.
EV/Sales (x) 6.5 5.7 4.8 Management guided for 24% YoY growth in sales from the Curatio portfolio in
FY23 and has enough potential to sustain the growth going forward as well.
Shareholding pattern (%)
TRP indicated regional expansion of the Curatio portfolio into North/East
As On Jun-22 Mar-22 Jun-21
India as one of the levers of growth in addition to new launches/line
Promoter 71.3 71.3 71.3
DII 10.0 9.7 8.4 extensions.
FII 10.8 10.9 11.7 Valuation and view:
Others 8.0 8.1 8.7 Considering TRP has had minimal exposure to the dermatology segment (2%
FII Includes depository receipts of Domestic formulation sales; DF), the acquisition would not only increase
its offerings, but also widen its scope by connecting with dermatologists and
pediatricians.
Further, TRP can leverage its strength to market its derma portfolio in the
North/East region, which remains untapped by Curatio.
Also, considering 600MRs, the MR productivity of Curatio at INR3Lacs PCPM
is less than industry average. Thus, there is significant scope for improving its
MR productivity as well, thereby increasing the margins from the Curatio
business.
Having said this, the valuation is expensive, considering recent deals in
domestic formulation space (Exhibit 1).
We have tweaked our EPS estimate by -2% for FY24 to factor in Curatio
acquisition. We continue to value TRP at 26x 12M forward earnings to arrive at a
price target of INR1500. While TRP remains a leading player in the DF segment,
we reiterate our Neutral rating on its limited upside potential.
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Torrent Pharma
Exhibit 6: Derma therapy contributes 95% to sales (FY22) Exhibit 7: Cosmo contributes 84% to Derma sales (FY22)
Derma Rest Cosmo Derma Medical Derma
5%
16%
95% 84%
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Torrent Pharma
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