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UBS Investment Research
Ranbaxy
Q3’10: Inline with expectation
Sales: Rs 18.8bn (+10%yoy, -10%qoq), dialogue with FDA continues
Sales at Rs 18.8bn were assisted by strong performance in U.S. and India. The
revenue in US at $86mn for the quarter was due to continued strong performance
of Valtrex. Sales in the domestic formulation business grew at 18% YoY. Mgmt.
stated that they have held meetings with FDA and DOJ, but were not able provide
any definite timeline for the settlement of the issue. The mgmt. indicated that it is
confident that it will be able to monetise Aricept and Lipitor opportunity.
EBITDA: Rs 1.4bn (-35% YoY); PAT: Rs 3.1bn (+168% YoY)
The EBITDA margin declined to 7.4% during the quarter on account of provision
of ~$10mn made on inventory write down and product recall. The employee cost
increased on account of expansion of sales force and manufacturing unit in
preparation of utilising the opportunity to arise post FDA and DOJ settlement. The
other optg. income of Rs 509mn includes export incentive, non-competent fee from
Daichi, and other misc. inc. MTM related forex gain for the quarter was Rs 2.6bn.
Settled Valcyte with Roche, Nexium API commercial shipment begins
Company made a settlement with Roche with respect to Valcyte and will launch
the product in Mar’13. Nexium APIs first batch of commercial supply has started
in the 4Q and the formulations supply should begin in next few months.
Valuation: Maintain Buy, PT Rs 720
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume a WACC of
11%. We add Rs15/share as risk adjusted value of the Valcyte opportunity.
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