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UBS Investment Research
Ranbaxy
Q4’10 – lower Aricept shipment hits margin
„ Sales in line despite lower Aricept shipment
Q4’10 sales were in line with estimates at Rs 20.6bn (-9%YoY, +10% QoQ),
despite lower than expected Aricept shipment and India sales (Rs 4.3bn, +7%
YoY), due to higher sales in the EU and higher API shipments. According to the
company, Aricept sales during the quarter have been lower than the average
monthly figure during the exclusivity period. However, the total sales during the 6-
month exclusivity period will not be impacted. Management indicated that the
India business grew 17% YoY in 2010, excluding tender-related business. For
2010, the co. reported robust YoY growth in other key geographies, except the EU.
„ Lower Aricept shipment impacts EBITDA and impairment hits PAT
EBITDA margin at 11.2% was lower than our estimate of 19% due to lower sales
of Aricept than anticipated. The company took a Rs. 1.8bn goodwill write-off
related to its French subsidiary and a Rs 2.2 bn charge (post tax) related to
diminution in value of an investment in Zenotech, an associate. As a result, the
company posted a loss of Rs 975mn in Q4’10, despite FX gains of Rs 2.17bn for
the quarter.
„ Reasonable guidance, but no clear timeline for USFDA issue resolution
Management has guided for Rs 84bn of revenue for 2011, excl. Lipitor generic.
Management reiterated its previous view that discussions continue to proceed with
the USFDA and DoJ relating to Indian mfr. sites. However, management refused to
give any timelines for resolution of the same. The company filed 12 ANDAs in
2010, incl. one PEPFAR filing.
„ 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 with a WACC of 11%.
Q Ranbaxy
Ranbaxy, one of India's largest pharmaceutical companies, manufactures and
markets generics, branded generic pharmaceuticals, and active pharmaceutical
ingredients. Ranbaxy's products are sold in over 125 countries. It has
manufacturing operations in 11 countries and a presence in 49. It was
incorporated in 1961 and was listed in 1973. Daiichi Sankyo acquired a 64%
stake in Ranbaxy in 2008. Ranbaxy's key markets, in terms of revenue, are India,
Romania, Russia, the US, and Africa and the EU.
Q Statement of Risk
We believe risks include regulatory risks, FDA approval, timing of approvals,
litigation (including the appeal process), accounting/disclosure, and product
pricing risk from generics competition. Pricing pressure in the US market
because of increased competition may continue. Margin pressure on account of
appreciation of the rupee could also negatively impact earnings.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Ranbaxy
Q4’10 – lower Aricept shipment hits margin
„ Sales in line despite lower Aricept shipment
Q4’10 sales were in line with estimates at Rs 20.6bn (-9%YoY, +10% QoQ),
despite lower than expected Aricept shipment and India sales (Rs 4.3bn, +7%
YoY), due to higher sales in the EU and higher API shipments. According to the
company, Aricept sales during the quarter have been lower than the average
monthly figure during the exclusivity period. However, the total sales during the 6-
month exclusivity period will not be impacted. Management indicated that the
India business grew 17% YoY in 2010, excluding tender-related business. For
2010, the co. reported robust YoY growth in other key geographies, except the EU.
„ Lower Aricept shipment impacts EBITDA and impairment hits PAT
EBITDA margin at 11.2% was lower than our estimate of 19% due to lower sales
of Aricept than anticipated. The company took a Rs. 1.8bn goodwill write-off
related to its French subsidiary and a Rs 2.2 bn charge (post tax) related to
diminution in value of an investment in Zenotech, an associate. As a result, the
company posted a loss of Rs 975mn in Q4’10, despite FX gains of Rs 2.17bn for
the quarter.
„ Reasonable guidance, but no clear timeline for USFDA issue resolution
Management has guided for Rs 84bn of revenue for 2011, excl. Lipitor generic.
Management reiterated its previous view that discussions continue to proceed with
the USFDA and DoJ relating to Indian mfr. sites. However, management refused to
give any timelines for resolution of the same. The company filed 12 ANDAs in
2010, incl. one PEPFAR filing.
„ 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 with a WACC of 11%.
Q Ranbaxy
Ranbaxy, one of India's largest pharmaceutical companies, manufactures and
markets generics, branded generic pharmaceuticals, and active pharmaceutical
ingredients. Ranbaxy's products are sold in over 125 countries. It has
manufacturing operations in 11 countries and a presence in 49. It was
incorporated in 1961 and was listed in 1973. Daiichi Sankyo acquired a 64%
stake in Ranbaxy in 2008. Ranbaxy's key markets, in terms of revenue, are India,
Romania, Russia, the US, and Africa and the EU.
Q Statement of Risk
We believe risks include regulatory risks, FDA approval, timing of approvals,
litigation (including the appeal process), accounting/disclosure, and product
pricing risk from generics competition. Pricing pressure in the US market
because of increased competition may continue. Margin pressure on account of
appreciation of the rupee could also negatively impact earnings.
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