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Ranbaxy Laboratories Limited
Q1 boosted by Aricept
„Aricept benefit continues; Maintain Neutral
Q1 profit at Rs3bn was ahead of estimates, largely due to (1) higher contribution
from Aricept FTF, (2) lower depreciation and tax rate. EBITDA at Rs3.7bn also
bettered expectations with margins at 17% (est 13%), but base margin recovery
was slower. Despite the surprise, we cut estimates by lowering base business
profit forecasts by 8%-12% over CY11-12E. Cut PO by 5% to Rs 510.
Sales on track
Sales at Rs21.5bn ($474mn) were 9% better than our expectation, solely due to
higher than expected sale of Aricept. Base business grew ~14% yoy, and in line.
Performance was aided by 14% growth in domestic formulations, similar to
industry thanks to Project Viraat, double-digit growth across emerging markets
where the company plans to increase outsourcing activities, and steady sale of
base US generics (US$70mn), in line with recent quarterly trends. We have
tweaked our forecasts which assume monetisation of FTF Lipitor (Nov 11).
Margins surprise, but driven by exclusivity
Margins were aided by increased contribution from exclusive opportunity.
However, we estimate base margins at ~8%, slightly below expectation, being
restricted by higher salaries to medical representatives. We have cut our base
margin forecasts by 90bps/year, to factor delayed resolution to US FDA issues
and increased staff compensation.
Key conference call takeaways
(1) Resolution of US FDA issue still in progress, but management clarified that
there is no factor obstructing dialogue (2) Commercialisation of Mohali facility
likely only in CY12, (3) EU markets improving trends, especially France,
(4) outstanding FCCBs redeemed, thereby lowering gearing even further.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ranbaxy Laboratories Limited
Q1 boosted by Aricept
„Aricept benefit continues; Maintain Neutral
Q1 profit at Rs3bn was ahead of estimates, largely due to (1) higher contribution
from Aricept FTF, (2) lower depreciation and tax rate. EBITDA at Rs3.7bn also
bettered expectations with margins at 17% (est 13%), but base margin recovery
was slower. Despite the surprise, we cut estimates by lowering base business
profit forecasts by 8%-12% over CY11-12E. Cut PO by 5% to Rs 510.
Sales on track
Sales at Rs21.5bn ($474mn) were 9% better than our expectation, solely due to
higher than expected sale of Aricept. Base business grew ~14% yoy, and in line.
Performance was aided by 14% growth in domestic formulations, similar to
industry thanks to Project Viraat, double-digit growth across emerging markets
where the company plans to increase outsourcing activities, and steady sale of
base US generics (US$70mn), in line with recent quarterly trends. We have
tweaked our forecasts which assume monetisation of FTF Lipitor (Nov 11).
Margins surprise, but driven by exclusivity
Margins were aided by increased contribution from exclusive opportunity.
However, we estimate base margins at ~8%, slightly below expectation, being
restricted by higher salaries to medical representatives. We have cut our base
margin forecasts by 90bps/year, to factor delayed resolution to US FDA issues
and increased staff compensation.
Key conference call takeaways
(1) Resolution of US FDA issue still in progress, but management clarified that
there is no factor obstructing dialogue (2) Commercialisation of Mohali facility
likely only in CY12, (3) EU markets improving trends, especially France,
(4) outstanding FCCBs redeemed, thereby lowering gearing even further.
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