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3Q results below estimates as
revenues disappointed; Lipitor
launch likely as scheduled
Action: 3Q revenue below estimates
3Q revenue, at INR20.2bn, was 5% below our estimates on lower India,
Africa and API sales. EBITDA at INR1.74bn was 4% below our estimates.
EBITDA was, to an extent, boosted by higher other operating income,
which is partially non-recurring. The lack of FTF in the quarter enhanced
visibility of base business revenues and margins, which was marginally
lower than our expectations.
Catalyst: Lipitor launch likely as scheduled
Management refrained from commenting explicitly on Lipitor, but remained
confident of monetising the opportunity. We expect Ranbaxy to launch
Lipitor around 30 Nov 2011, as scheduled. We attach low probability of
forfeiture of exclusivity or sharing of the upside with a third party.
However, we see downside risk to pricing and market share assumption,
given an aggressive stance by Pfizer to retain Lipitor market share during
exclusivity. We currently factor in a 55% price discount and a 45% market
share for Ranbaxy during exclusivity. Overall for the 180-day period, we
currently build in revenues of USD750mn for Ranbaxy.
Valuation: Factoring in Lipitor upside and revival in base business;
Sell on any rally
Adjusted for FTF upside, Ranbaxy trades at 24x 2012F base earnings: a
premium to its peers, in our view. Our estimates factor in 128% growth in
base business earnings driven by Lipitor post-exclusivity revenues and
FDA resolution. Our INR480 TP factors in INR60/sh from Lipitor and
INR30/sh as potential penalty. We reiterate our Reduce and would sell
into any possible rally on Lipitor approval/launch.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
3Q results below estimates as
revenues disappointed; Lipitor
launch likely as scheduled
Action: 3Q revenue below estimates
3Q revenue, at INR20.2bn, was 5% below our estimates on lower India,
Africa and API sales. EBITDA at INR1.74bn was 4% below our estimates.
EBITDA was, to an extent, boosted by higher other operating income,
which is partially non-recurring. The lack of FTF in the quarter enhanced
visibility of base business revenues and margins, which was marginally
lower than our expectations.
Catalyst: Lipitor launch likely as scheduled
Management refrained from commenting explicitly on Lipitor, but remained
confident of monetising the opportunity. We expect Ranbaxy to launch
Lipitor around 30 Nov 2011, as scheduled. We attach low probability of
forfeiture of exclusivity or sharing of the upside with a third party.
However, we see downside risk to pricing and market share assumption,
given an aggressive stance by Pfizer to retain Lipitor market share during
exclusivity. We currently factor in a 55% price discount and a 45% market
share for Ranbaxy during exclusivity. Overall for the 180-day period, we
currently build in revenues of USD750mn for Ranbaxy.
Valuation: Factoring in Lipitor upside and revival in base business;
Sell on any rally
Adjusted for FTF upside, Ranbaxy trades at 24x 2012F base earnings: a
premium to its peers, in our view. Our estimates factor in 128% growth in
base business earnings driven by Lipitor post-exclusivity revenues and
FDA resolution. Our INR480 TP factors in INR60/sh from Lipitor and
INR30/sh as potential penalty. We reiterate our Reduce and would sell
into any possible rally on Lipitor approval/launch.
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