Though ranked 17th in terms of total revenue in the domestic formulations segment, Torrent derives its strength from being the leader in some of the most lucrative and fastest growing chronic therapy segments. It enjoys market leadership in niche therapy segments of CVS and CNS, which are highly profitable and are likely to sustain high growth.
The company has consistently delivered improving financial performance, with RoCE increasing from 14.5% in FY05 to 24.1% in FY11, RoE from 15.7% to 29.2% and EBITDA margin from 8.3% to 14.4%. Over FY05-11, revenue grew at 26% CAGR, and EBITDA and net profit grew at 33% and 34% CAGR respectively; however, capital employed grew at just 17% CAGR. Torrent's net debt-equity ratio has come down from 0.7x in FY07 to zero in FY11."
At 12x FY13E earnings, the Stock trades at historic valuations, despite growing in size and profitability, says Motilal oswal.