Torrent Pharmaceuticals Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Torrent Pharmaceuticals Ltd (TORNTPHARM) Q4 FY22 Earnings Concall

Q&A Highlights:

• Anubhav Aggarwal of Credit Suisse asked about Brazil market, how much the five launches the company did in 4Q22 contributed as a percentage of sales. Sanjay Gupta ED said the company showed a growth of about 21% and roughly about 13-14% of that is the contribution from new launches.

• Anubhav Aggarwal of Credit Suisse enquired how is the company expecting Brazil sales growth in FY23. Sanjay Gupta ED replied that looking at Brazilian GDP growth, it was about 4-4.5% and next year forecast is looking at less than 1%. So assuming that market growth at 8-10%, the company should be well above that.

• Anubhav Aggarwal of Credit Suisse asked if the closedown of the facility in the US would help reduce cost in subsequent quarter. Sudhir Menon CFO answered that the operating expenses on a full year basis is INR135 crore, which should be the cost saving from the closure for FY23.

• Damayanti Kerai of HSBC enquired how the company looks at sales in Germany market going forward. Sanjay Gupta ED answered that the company expects sales in second half FY23 to be better than the sales in first half in terms of growth momentum. The company also has 10-15 launches in FY23, the bulk of which will be coming after Sept. Oct. also.

• Damayanti Kerai of HSBC also asked about the tender and retail market in Germany. Sanjay Gupta ED replied that tender sales are roughly 60% of the company’s business.

• Damayanti Kerai of HSBC asked how the company should look at FY23 growth over FY22 and the split of growth contribution from volume, price and new launches. Aman Mehta ED said that for 4Q, reflection of growth was 11%. And of that new products was 3%, price was 8%, and volume 0%. So volume is about 3-4% above the market growth currently. On a CAGR basis, double digit growth should be doable for the market.

• Neha Manpuria with Bank of America asked that on the field force addition, if all of the planned addition is done. Aman Mehta ED answered that there would be some additional expansion happening by end of 1Q23, which is when the company expects the entire exercise to be complete. So 4Q22 ended at 3,900 and probably another 200-300 reps by end of 1Q23.

• Neha Manpuria with Bank of America enquired if the field force addition were all for existing divisions or for new ones. Aman Mehta ED said the company has launched a new division in CVD and most of the field force for the new launches are coming up in FY23.

• Shyam Srinivasan of Goldman Sachs enquired about capital allocation and M&A priority. Aman Mehta ED said that M&A happens when it has to happen. From a capital allocation perspective, over the next 2 years, most of company’s existing debt would be repaid. From third year onwards, the kind of cash flow generation that will happen with US and Germany coming back on track, there is good amount of capital allocation possible for any acquisition.

• Nitin Agarwal of DAM Capital asked about the reason for increase in other expenses in 4Q. Sudhir Menon CFO answered that there was a lump in terms of the US filing phase that came in that ideally should have got distributed over the quarter. Secondly, there was a big lumpsum in terms of donations of INR18 crore. Lastly, the freight expenses have gone up little bit more than 3Q22, around INR8 crore.

• Nitin Agarwal of DAM Capital also asked about the driver of employee expense reducing QonQ. Sudhir Menon CFO said it was due to reworking of annual incentives, reversal of provisions, plus the reversal of Chairman’s commission.