TORNTPHARM - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 4.2
| Stock Code | TORNTPHARM | Market Cap | 1,36,454 Cr. | Current Price | 4,032 ₹ | High / Low | 4,125 ₹ |
| Stock P/E | 63.9 | Book Value | 250 ₹ | Dividend Yield | 0.80 % | ROCE | 27.8 % |
| ROE | 26.2 % | Face Value | 5.00 ₹ | DMA 50 | 3,888 ₹ | DMA 200 | 3,617 ₹ |
| Chg in FII Hold | 0.21 % | Chg in DII Hold | -0.12 % | PAT Qtr | 606 Cr. | PAT Prev Qtr | 551 Cr. |
| RSI | 57.1 | MACD | 36.6 | Volume | 3,25,019 | Avg Vol 1Wk | 3,35,933 |
| Low price | 2,886 ₹ | High price | 4,125 ₹ | PEG Ratio | 2.63 | Debt to equity | 0.25 |
| 52w Index | 92.5 % | Qtr Profit Var | 31.8 % | EPS | 62.3 ₹ | Industry PE | 29.1 |
📊 Analysis: Torrent Pharma (TORNTPHARM) demonstrates strong fundamentals with ROE at 26.2% and ROCE at 27.8%, reflecting excellent capital efficiency. EPS of 62.3 ₹ provides solid earnings visibility, while debt-to-equity ratio of 0.25 indicates manageable leverage. Dividend yield of 0.80% adds shareholder value. However, the stock trades at a high P/E of 63.9 compared to industry average of 29.1, suggesting premium valuation. PEG ratio of 2.63 indicates growth is priced expensively. Technically, the stock is trading above both 50 DMA (3,888 ₹) and 200 DMA (3,617 ₹), showing bullish momentum, supported by RSI at 57.1 and positive MACD (36.6). Quarterly PAT improved (606 Cr. vs 551 Cr.), highlighting earnings resilience.
💡 Entry Zone: Ideal accumulation range is between 3,800 ₹ – 3,950 ₹, closer to support levels and valuation comfort.
📈 Exit / Holding Strategy: Existing holders should maintain positions for long-term compounding. Exit strategy: partial profit booking near 4,100–4,150 ₹ resistance. Holding period: 3–5 years, supported by strong ROE/ROCE and consistent profit growth.
Positive
- High ROE (26.2%) and ROCE (27.8%) indicate superior efficiency.
- EPS of 62.3 ₹ reflects strong earnings base.
- Quarterly PAT growth (606 Cr. vs 551 Cr.) shows resilience.
- Debt-to-equity ratio of 0.25 highlights financial stability.
- Stock trading above both 50 DMA and 200 DMA indicates technical strength.
Limitation
- High P/E (63.9) compared to industry average (29.1).
- PEG ratio of 2.63 suggests growth is priced expensively.
- Dividend yield of 0.80% is modest.
- DII holdings decreased (-0.12%), showing reduced domestic institutional support.
Company Negative News
- Premium valuation limits upside potential.
- Minor decline in DII holdings indicates cautious sentiment.
Company Positive News
- Quarterly PAT improvement highlights earnings resilience.
- FII holdings increased (+0.21%), showing foreign investor confidence.
- Technical indicators (RSI 57.1, MACD 36.6) suggest bullish momentum.
Industry
- Industry P/E at 29.1 indicates moderate valuations compared to Torrent Pharma’s premium.
- Pharmaceutical sector benefits from consistent demand, exports, and healthcare expansion.
Conclusion
✅ Torrent Pharma is a strong candidate for long-term investment. Superior ROE/ROCE, consistent earnings growth, and manageable debt support compounding potential. Entry around 3,800–3,950 ₹ offers margin of safety. Long-term investors should hold for 3–5 years, with partial exits near 4,100–4,150 ₹. Despite premium valuations, fundamentals and sector tailwinds justify accumulation.