Torrent Pharma. (TORNTPHARM)

FairStock Score: 54/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 2/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Exceptional capital efficiency: ROE 29.93%, ROCE 27.05%, with conservative D/E of 0.33.
• Strong financial health: FCF ₹2,036 Cr, Altman Z 8.47, Piotroski F-Score 8/9.
• Good recent execution: Q sales ₹3,303 Cr, net profit ₹635 Cr; profit growth 22.02% exceeds sales growth 12.74%.
• High promoter holding of 68.31% aligns owners with management.

Concerns

• Valuation is extreme: P/E 63.61, P/B 18.49, EV/EBITDA 82.13, PEG 5.15.
• Price far above intrinsic estimates: Graham Number ₹582 and DCF ₹3,221 vs price ₹4,147; margin of safety -644.51%.
• 5-year revenue CAGR of only 7.54% makes the high multiple dependent on sustained profit acceleration.
• Dividend yield of just 0.74% offers little downside cushion.

AI Analysis

I look for wonderful businesses at a fair price, and Torrent Pharma gives me the wonderful business half—but not the fair price. The numbers say this is an exceptionally well-run pharmaceutical company: return on equity of 29.93%, return on capital employed of 27.05%, and debt/equity of just 0.33. Free cash flow of ₹2,036 crore, an Altman Z-score of 8.47, and a Piotroski score of 8/9 all speak to financial health. The latest quarter shows sales of ₹3,303 crore and net profit of ₹635 crore, with profit growth of 22.02% beating sales growth of 12.74%—the kind of operating leverage I like. Promoter holding of 68.31% also keeps management aligned with minority shareholders. The FairStock score of 54/100 correctly labels this as mixed, because the quality is real but the price is not. At ₹4,147, the stock trades at a P/E of 63.61, a P/B of 18.49, and an EV/EBITDA of 82.13. Graham’s number is only ₹582, implying a margin of safety of negative 644%. Even a DCF fair value of ₹3,221 sits well below the market price. The five-year revenue CAGR of 7.54% reminds me that this is not a hyper-growth story, so paying a PEG of 5.15 makes no sense. A 0.74% dividend yield offers little compensation while waiting. This is a fine company, probably deserving a spot on a watchlist, but Mr. Market is asking for perfection. In investing, I require a margin of safety; here that margin is absent. I would wait for better value before committing capital.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer