Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ranbaxy Laboratories Limited
Below par Q4; Neutral on positive triggers ahead
„Weak Aricept sales led to Q4 slippage
Q4/CY10 profit at Rs1.1bn/Rs12.1bn was well below expectations, due to
(1) lower contribution from Aricept FTF, (2) weak base business margins. As a
result, CY10 EBITDA grew much slower to Rs18bn (est Rs22.7bn). We expect
margins to remain subdued near term, and therefore cut EPS forecasts over
CY11-12E by 13%-19%. We also lower PO by 14% to Rs535, but retain Neutral
rating on likely positive triggers of early resolution to US FDA issue and possible
monetisation of key exclusivities, namely Lipitor, Actos, Nexium, Caduet.
Margins disappoint; expect delayed improvement
Q4 EBITDA margin at 9.8% was well below expectation due to (a) weaker than
expected base business profit, and (b) sharper price erosion of ~70% in Aricept
FTF. With management not clarifying status of US FDA issue, we now expect
resolution by Q4-CY11 instead of mid-year earlier. We therefore expect base
business margin expansion to be restricted to 12.8% in CY11E (vs 15.6% earlier),
and 14.4% in CY12E (vs 17.9%).
Sales guidance in line with expectations
Management base sales guidance in CY11 at Rs84bn (ex-Lipitor), includes
Aricept FTF, which is similar to our forecasts. Maintain estimates, driven by
implementation of Project Viraat (domestic formulations), clearance of
Dewas/Poanta facilities (US), and ramp up in branded formulation exports (RoW
markets). We also expect timely monetisation of FTF pipeline, including Lipitor.
Maintain Neutral on limited upside potential
Despite the 18% YTD stock correction, maintain Neutral rating due to limited
upside on our lowered sum of parts value of Rs535, which is includes (1) base
business value of Rs411/sh, at 22x Mar-12E EPS & (2) NPV of FTF at Rs124/sh
Price objective basis & risk
Ranbaxy Laboratories Limited (XIZZF)
Our PO of Rs535/sh is based on SoTP comprising Rs411/sh for the core
business and Rs124/sh for the first to file (FTF) launches expected till 2014. Our
Rs411/sh valuation of Ranbaxy's core business is based on 22x Mar-12E core
EPS, in line with stock's long term historical valuations and large cap peers like
Sun Pharma, DRL, Cipla, etc. We believe that high multiple is justified given
improving base business profitability as well as higher confidence on USFDA
issue resolution. Our Rs124/sh valuation for Ranbaxy's FTF products (Aricept,
Lipitor, Caduet, Actos, Nexium deal, etc) is based on NPV of the expected
launches in each of the years. Overall we forecast 42pc reported EPS CAGR
(CY10-12E).
Risks (1) USFDA and Department of Justice (DoJ) issues relating to
manufacturing plants (Poanta Sahib and Dewas), (2) poor base business
profitability, (3) lower than expected synergies from Daiichi Sankyo integration
and (4) Impact of forex fluctuations.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ranbaxy Laboratories Limited
Below par Q4; Neutral on positive triggers ahead
„Weak Aricept sales led to Q4 slippage
Q4/CY10 profit at Rs1.1bn/Rs12.1bn was well below expectations, due to
(1) lower contribution from Aricept FTF, (2) weak base business margins. As a
result, CY10 EBITDA grew much slower to Rs18bn (est Rs22.7bn). We expect
margins to remain subdued near term, and therefore cut EPS forecasts over
CY11-12E by 13%-19%. We also lower PO by 14% to Rs535, but retain Neutral
rating on likely positive triggers of early resolution to US FDA issue and possible
monetisation of key exclusivities, namely Lipitor, Actos, Nexium, Caduet.
Margins disappoint; expect delayed improvement
Q4 EBITDA margin at 9.8% was well below expectation due to (a) weaker than
expected base business profit, and (b) sharper price erosion of ~70% in Aricept
FTF. With management not clarifying status of US FDA issue, we now expect
resolution by Q4-CY11 instead of mid-year earlier. We therefore expect base
business margin expansion to be restricted to 12.8% in CY11E (vs 15.6% earlier),
and 14.4% in CY12E (vs 17.9%).
Sales guidance in line with expectations
Management base sales guidance in CY11 at Rs84bn (ex-Lipitor), includes
Aricept FTF, which is similar to our forecasts. Maintain estimates, driven by
implementation of Project Viraat (domestic formulations), clearance of
Dewas/Poanta facilities (US), and ramp up in branded formulation exports (RoW
markets). We also expect timely monetisation of FTF pipeline, including Lipitor.
Maintain Neutral on limited upside potential
Despite the 18% YTD stock correction, maintain Neutral rating due to limited
upside on our lowered sum of parts value of Rs535, which is includes (1) base
business value of Rs411/sh, at 22x Mar-12E EPS & (2) NPV of FTF at Rs124/sh
Price objective basis & risk
Ranbaxy Laboratories Limited (XIZZF)
Our PO of Rs535/sh is based on SoTP comprising Rs411/sh for the core
business and Rs124/sh for the first to file (FTF) launches expected till 2014. Our
Rs411/sh valuation of Ranbaxy's core business is based on 22x Mar-12E core
EPS, in line with stock's long term historical valuations and large cap peers like
Sun Pharma, DRL, Cipla, etc. We believe that high multiple is justified given
improving base business profitability as well as higher confidence on USFDA
issue resolution. Our Rs124/sh valuation for Ranbaxy's FTF products (Aricept,
Lipitor, Caduet, Actos, Nexium deal, etc) is based on NPV of the expected
launches in each of the years. Overall we forecast 42pc reported EPS CAGR
(CY10-12E).
Risks (1) USFDA and Department of Justice (DoJ) issues relating to
manufacturing plants (Poanta Sahib and Dewas), (2) poor base business
profitability, (3) lower than expected synergies from Daiichi Sankyo integration
and (4) Impact of forex fluctuations.
No comments:
Post a Comment