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1QCY11 results
Higher than expected contribution from Aricept generic and a higher interest
income resulted in higher than expected reported profits. Ranbaxy’s growth in
India market was encouraging, something we expect to continue through the
coming quarters considering addition in field force in early 2010. We continue to
see binary outcome for the stock based on approval/monetization of Lipitor
opportunity in November 2011. We expect YoY decline in reported profits for two
more quarters as a result of lower contribution from their US business and forex
gains in the base.
Growth in emerging markets remains weak, US declines due to high base
Net sales for the quarter were down 13.8% YoY due to a high base in the US
(Valtrex opportunity in the same quarter last year).
Ranbaxy benefitted with US$75-80m in sales from Aricept that was the key
opportunity during the quarter with marginal contribution from oxycodone. Aricept
saw sharp price decline in 4QCY10 due to competition from Greenstone
(authorised generic).
Domestic formulations grew c. 13% YoY in 1Q in-line with industry growth though
IMS suggest material improvement in Ranbaxy’s domestic growth.
API sales at US$25m due to pick in Nexium API supply to AstraZeneca with
formulation supply expected to start in a quarter or two.
Growth in branded markets like Africa, LatAm and Russia was weak in 1QCY11.
Improvement in core margins encouraging
Apart from rise in staff costs on YoY basis, rest of operating costs were marginally
higher and well under control. This brought an encouraging improvement in
Ranbaxy’s core operating margin.
With redemption of FCCB in March 2011, Ranbaxy’s interest income is expected to
decline in coming quarter.
Binary outcome - high dependence on Lipitor
We expect resolution of the US FDA issues to be a gradual process and do not
expect resolution of AIP at Paonta Sahib over the coming year.
Monetisation of Lipitor remains the key for the stock to perform. We expect Lipitor
to be an extended limited competition prospect in the US.
Substantial earnings from the US opportunities and forex gains in CY10 set a high
base for reported earnings growth in CY11 and we expect YoY profit decline for
the two more quarters.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QCY11 results
Higher than expected contribution from Aricept generic and a higher interest
income resulted in higher than expected reported profits. Ranbaxy’s growth in
India market was encouraging, something we expect to continue through the
coming quarters considering addition in field force in early 2010. We continue to
see binary outcome for the stock based on approval/monetization of Lipitor
opportunity in November 2011. We expect YoY decline in reported profits for two
more quarters as a result of lower contribution from their US business and forex
gains in the base.
Growth in emerging markets remains weak, US declines due to high base
Net sales for the quarter were down 13.8% YoY due to a high base in the US
(Valtrex opportunity in the same quarter last year).
Ranbaxy benefitted with US$75-80m in sales from Aricept that was the key
opportunity during the quarter with marginal contribution from oxycodone. Aricept
saw sharp price decline in 4QCY10 due to competition from Greenstone
(authorised generic).
Domestic formulations grew c. 13% YoY in 1Q in-line with industry growth though
IMS suggest material improvement in Ranbaxy’s domestic growth.
API sales at US$25m due to pick in Nexium API supply to AstraZeneca with
formulation supply expected to start in a quarter or two.
Growth in branded markets like Africa, LatAm and Russia was weak in 1QCY11.
Improvement in core margins encouraging
Apart from rise in staff costs on YoY basis, rest of operating costs were marginally
higher and well under control. This brought an encouraging improvement in
Ranbaxy’s core operating margin.
With redemption of FCCB in March 2011, Ranbaxy’s interest income is expected to
decline in coming quarter.
Binary outcome - high dependence on Lipitor
We expect resolution of the US FDA issues to be a gradual process and do not
expect resolution of AIP at Paonta Sahib over the coming year.
Monetisation of Lipitor remains the key for the stock to perform. We expect Lipitor
to be an extended limited competition prospect in the US.
Substantial earnings from the US opportunities and forex gains in CY10 set a high
base for reported earnings growth in CY11 and we expect YoY profit decline for
the two more quarters.
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