Torrent Pharma shares halt 5-day climb, slip 4% today; should you buy, sell or hold?

Shares of Torrent Pharmaceuticals Ltd on Thursday settled 3.75 per cent lower at Rs 1,775.15, halting their five-day winning run. The stock witnessed a sharp upmove in the previous session and touched a one-year high of Rs 1,886.25 (intraday) after posting strong fourth-quarter results (Q4 FY23). Two domestic brokerages have assigned their respective 'Buy' ratings on the counter with a one-year target price of up to Rs 1,995.

AnandRathi said, "Driven by healthy growth in its branded generics business for India, Brazil and RoW (up 23 per cent), Torrent's Q4 revenue grew 17 per cent, year-on-year (YoY), to Rs 2,490 crore. The EBITDA margin was steady, quarter-on-quarter (QoQ) to 29.20 per cent. Higher finance costs and lower other income pulled PAT (profit after tax ) down 11 per cent YoY to Rs 290 crore. We retain our 'Buy' rating on the stock, at a higher 12-month target price of Rs 1,995, 19x FY25e EV/EBITDA."

Strong growth in domestic chronic therapies, launches and price hikes in India, Brazil and RoW would drive 24 per cent earnings growth in FY23-25, it added.

On the other hand, the brokerage cited pricing in the domestic portfolio, currency fluctuations and regulatory issues at plants as risks.

Prabhudas Lilladher said, "Q4 FY23 EBITDA was largely in line, however, PAT was below our estimate led by higher tax and a one-time inventory write-off. Torrent has Rs 7,000 crore (75 per cent of total sales) worth of highly profitable branded formulation sales spread across India, Brazil and RoW markets. In the near term, Curatio acquisition will increase the company's net debt and we see this acquisition as EPS dilutive. Also, historically the company has successfully managed to integrate Unichem and Elder acquisition which gives us comfort. Maintain 'Buy' rating with a revised target price of Rs 1,900 per share (Rs 1,820 earlier), 17x EV/EBITDA to FY25E."

The pharma company's base business grew 15 per cent and it expects India's business to continue its current growth momentum backed by new launches and integration of Curatio, Prabhudas further stated.

On the technical setup, the counter largely looked 'overbought'.

AR Ramachandran from Tips2trades said, "Torrent Pharma is bullish but also overbought on the daily charts with next resistance at Rs 1,909. Investors should book profits at current levels and a close below Daily support of Rs 1,733 could lead to a target of Rs 1,515 in the near term."

VLA Ambala, Research Analyst at Stock Market Today, said, "The stock's major support is at Rs 1,440 and the expected target is a near term to mid-terms are between Rs 1,900 and Rs 2,100. Currently, it looked overbought. So, it is better to wait for prices to come down a little before initiating any fresh long positions."

Meanwhile, Indian equity benchmarks settled in the red today, dragged by banks and financials.