Torrent Pharma: Nomura maintains 'Neutral' with Rs 4,670 target price ahead of Q2 results

This significantly outpaced broader market growth of 12%. The brokerage models 17% year-on-year growth for the base business, excluding JB Pharma, and 14% growth for JB Pharma. Nomura expects US revenue to decline sequentially by $4 million to $40 million, as sales in the previous quarter benefited from one-time factors. In Brazil, revenue in the first quarter was affected by channel inventory correction.

Adjusting for this, constant-currency growth reached the mid-to-high teens, according to management. Nomura forecasts 17% year-on-year constant-currency growth for the second quarter. Other international revenue, including Germany, is expected to grow in the low single digits year-on-year. The brokerage expects further EBITDA margin expansion on a sequential basis as cost synergies from the JB Pharma acquisition continue to materialise.

In the first quarter, JB Pharma's EBITDA margin expanded 650 basis points year-on-year, driven by gross margin improvement and overhead cost synergies. Management had guided for additional cost synergies in the second, third and fourth quarters of FY27 and confirmed that synergies for the full year would exceed its earlier guidance of Rs 900 million. It has guided for total cost synergies of Rs 4.5 billion by FY29.

Nomura believes a substantial portion of these synergies will be realised in FY27 itself. As part of the cost synergy programme, the company plans to rationalise its field force from 9,400 employees as of the first quarter to 9,000 in the second quarter. Nomura projects an EBITDA margin of 34.4%, an expansion of 158 basis points year-on-year. It assumes an EBITDA margin of 33.9% for the business excluding JB Pharma, up 110 basis points year-on-year, and a 35.9% margin for JB Pharma, up 163 basis points sequentially.

The brokerage's estimates for second-quarter sales, EBITDA and profit after tax are 2%, 5% and 5% above consensus, respectively. Nomura maintained its 'Neutral' rating and target price of Rs 4,670, based on 25 times December 2027 forecast EBITDA of Rs 75.7 billion. The stock currently trades at 30 times March 2027 forecast EBITDA. Torrent Pharma shares have corrected 8% over the past month, underperforming the broader market, with the Nifty down 3%.

Nomura said relative high valuation and market concerns over the expansion of price controls in domestic pharmaceuticals may have driven the correction. Torrent Pharma has around 11% of its sales under price control, the lowest among its peers. The brokerage noted that price increases have been a dominant driver of growth in the Indian pharmaceutical market.