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Torrent Pharmaceuticals Debt surged on 142% in 2015 and Net Debt / EBITDA surged on 1.8x from 0.4x to 2.1x

15-05-2015 • About Torrent Pharmaceuticals ($TORNTPHARM) • By InTwits

Torrent Pharmaceuticals reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Torrent Pharmaceuticals has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.8%. At the same time it's a lot of higher than industry average of 6.7%.
  • CAPEX is quite volatile: 4,099 in FY2015, 1,895 in FY2014, 1,081 in FY2013, 1,630 in FY2012, 1,275 in FY2011
  • The company has highly profitable business model: ROIC is at 19.7%
  • It operates with high leverage: Net Debt/EBITDA is 2.1x while industry average is 1.3x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Torrent Pharmaceuticals ($TORNTPHARM) key annual financial indicators

mln. INR201120122013201420152015/2014
Net Income2,7022,8404,3286,6397,50913.1%
Balance Sheet
Short Term Debt9962,6822,6313,9155,66744.8%
Long Term Debt2,9303,2214,5457,44521,852193.5%
Cash flow
Revenue growth-63.5%22.7%17.7%32.2%13.6%
EBITDA growth-6.9%34.9%33.3%37.0%6.8%
EBITDA Margin18.3%20.2%22.8%23.7%22.2%-1.4%
Net Income Margin12.8%10.9%14.2%16.4%16.4%-0.1%
SG&A, % of revenue11.6%11.6%
CAPEX, % of revenue12.5%6.6%9.6%9.9%5.3%-4.6%
Net Debt/EBITDA-0.2x0.8x0.1x0.4x2.1x1.8x

Revenue and profitability

Torrent Pharmaceuticals's Revenue jumped on 13.6% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.7 pp from 12.4% to 15.1% in FY2015.

Net Income marign showed almost no change in FY2015.

Capital expenditures (CAPEX) and working capital investments

In FY2015 Torrent Pharmaceuticals had CAPEX/Revenue of 5.3%. CAPEX/Revenue decreased slightly on 1.3 pp from 6.6% in FY2012 to 5.3% in FY2015. Average CAPEX/Revenue for the last three years was 8.3%.

Return on investment

The company operates at high and attractive ROE (34.19%) while ROIC is a bit lower (19.65%). ROIC dropped on 13.5 pp from 33.2% to 19.7% in FY2015. ROE decreased on 5.8 pp from 39.9% to 34.2% in FY2015.

Leverage (Debt)

Debt level is 2.1x Net Debt / EBITDA and 2.7x Debt / EBITDA. Net Debt / EBITDA jumped on 1.8x from 0.4x to 2.1x in FY2015. Debt surged on 142% in FY2015 while cash dropped on 26.5% in FY2015.

Appendix 1: Peers in Pharmaceuticals

Below we provide Torrent Pharmaceuticals benchmarking against other companies in Pharmaceuticals industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Granules India ($GRANULES)37.6%16.9%43.4%18.1%
Marksans Pharma ($MARKSANS)-66.6%16.7%23.3%43.3%
Sun Pharmaceutical Industries ($SUNPHARMA)-87.8%39.9%40.4%42.4%
Abbott India ($ABBOTINDIA)-46.4%8.2%8.7%27.3%
Sharon Bio-Medicine ($SHARONBIO)-37.2%28.3%33.5%23.4%
Median (41 companies)-45.0%16.6%14.7%12.6%8.6%
Torrent Pharmaceuticals ($TORNTPHARM)22.7%17.7%32.2%13.6%

Top companies by Gross margin, %

Top  FY2011 FY2012 FY2013 FY2014 FY2015
Dr.Reddy'S Laboratories ($DRREDDY)52.1%57.4%57.6%
Omega Laboratories ($OMEGALAB)0.0%0.0%0.0%0.0%
Median (2 companies)46.9%26.1%28.7%28.8%

Top companies by EBITDA margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Sun Pharmaceutical Industries ($SUNPHARMA)34.3%40.8%44.3%44.9%
Divi'S Laboratories ($DIVISLAB)38.1%37.2%38.2%40.2%
Venus Remedies ($VENUSREM)24.9%25.2%25.6%25.5%
Dr.Reddy'S Laboratories ($DRREDDY)21.7%25.8%22.9%25.1%23.2%
Natco Pharma ($NATCOPHARM)21.3%21.5%23.2%24.9%
Median (36 companies)16.2%12.7%12.8%14.3%14.3%
Torrent Pharmaceuticals ($TORNTPHARM)18.3%20.2%22.8%23.7%22.2%

Top companies by CAPEX/Revenue, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Granules India ($GRANULES)5.3%8.8%15.2%24.3%11.4%
Dishman Pharmaceuticals & Chemicals ($DISHMAN)24.3%8.4%10.9%21.6%
Venus Remedies ($VENUSREM)26.6%23.2%22.2%17.5%
Shasun Pharmaceuticals ($SHASUNPHAR)4.3%10.4%15.2%15.8%11.3%
Natco Pharma ($NATCOPHARM)20.0%24.4%16.3%14.4%
Median (28 companies)7.3%8.2%7.5%5.7%6.4%
Torrent Pharmaceuticals ($TORNTPHARM)12.5%6.6%9.6%9.9%5.3%

Top companies by ROIC, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Alembic Pharmaceuticals ($APLLTD)27.5%29.1%41.5%35.7%
Sun Pharmaceutical Industries ($SUNPHARMA)18.9%24.8%31.1%35.0%
Marksans Pharma ($MARKSANS)-25.8%-142.4%34.9%33.8%
Jenburkt Pharmaceuticals ($JENBURPH)43.6%34.1%29.0%32.4%
Divi'S Laboratories ($DIVISLAB)25.6%30.6%30.4%32.3%
Median (63 companies)13.5%13.7%13.2%14.4%10.8%
Torrent Pharmaceuticals ($TORNTPHARM)22.3%26.4%30.5%33.2%19.7%

Top companies by Net Debt / EBITDA

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Ind-Swift Laboratories ($INDSWFTLAB)4.6x5.5x16.1x19.5x
Shasun Pharmaceuticals ($SHASUNPHAR)4.5x2.8x4.5x6.0x6.2x
Sharon Bio-Medicine ($SHARONBIO)4.6x4.7x5.3x4.5x
Jubilant Life Sciences Limited ($JUBILANT)5.3x4.0x3.5x3.5x6.4x
Kopran ($KOPRAN)6.0x4.5x3.0x3.0x
Median (50 companies)1.6x1.6x1.4x0.4x1.6x
Torrent Pharmaceuticals ($TORNTPHARM)-0.2x0.8x0.1x0.4x2.1x