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Ranbaxy Laboratories Ltd. | Q2CY13 Result Update




IndiaNivesh Securities Pvt Ltd


08 Aug 2013





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Ranbaxy Laboratories Ltd. | Q2CY13 Result Update Early signs of improvement in operations During the quarter Ranbaxy’s operating performance was almost in-line with consensus estimates. Important thing to note was improvement in operating performance on sequential basis. During the quarter, Ranbaxy’s revenue declined 17.8% y-o-y (grew 7.9% q-o-q) to Rs 26.33 billion in Q2CY13 almost inline with consensus estimates of Rs 26.84 billion. On sequential basis, growth was driven by North America, LATAM & APAC region. Additionally, API business grew 36% y-o y in the current quarter. Domestic business was almost flat on y-o-y basis due to slow growth in anti-infective business and disruption in stocking linked with new pricing policy implementation. Sharp decline in revenue on annual basis was mainly due to higher base in the same quarter previous year linked with 180 days exclusivity of generic Lipitor. Valuations: At CMP of Rs 282, the stock is trading at P/E multiple of 13.3x of CY13E & 10.4x of CY14E earnings estimates. We sense that linked with Consent Decree, company’s expenses are likely to decline marginally by the end of the year. In most of the markets, company’s performance was under pressure except in Africa, LATAM & US market. Positive surprise during the quarter was improvement in US core business and improvement in margins. Stock has been beaten down post penalty payment to DOJ. In our view, stock’s performance would depend on monetization of FTF opportunities, launch of niche products in US market, improvement in base business & development on Consent Decree. However, due to sequential improvement in performance, stock may see short term beef up. Valcyte launch (likely in Sep 2013) & Diovan approval (no time line so far) will be key trigger for stock to sustain in long term. Albeit there is still no visibility on consent decree resolution in near term. We continue to maintain NEUTRAL view on the stock with negative bias, while target price is under review.

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