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Ranbaxy – 3QCY2010 Result Update
Angel Broking maintains a Neutral on Ranbaxy
For 3QCY2010, Ranbaxy reported higher-than-expected revenues and OPM
driven by strong market share of Valacyclovir in the US, while net profit was
primarily buoyed by forex gains. The company remains confident on monetising
it’s FTFs (including near term Aricept). However, the company disappointed due
to the lack of clarity on the time-line resolution of the USFDA and DOJ issues
(pending more than two years) and would continue to be an overhang on the
stock. We maintain Neutral on the stock.
Results driven by Valacyclovir and forex gains: Ranbaxy reported net sales of
`1,884cr, up 9.8% driven primarily by the higher-than-expected sales of
Valacyclovir in the US.
The North America region grew by a stellar 70% yoy to
`491cr as Valacyclovir, even post exclusivity, continued to have a strong market
share of 36%. Ranbaxy reported OPM of 4.7%, which was however marred by
inventory provision; adjusting for the same OPM came higher than our estimates
at 7.3% driven by strong market share in Valacyclovir. Ranbaxy reported net profit
of `308cr, which more than doubled yoy primarily due to the forex gain; for the
quarter forex gains from FCCBs and derivative contract came in at `259cr.
Outlook and Valuation: The stock is trading at EV/Sales (ex FTF) of 3.3x CY2011E
and 2.8x CY2012E. We recommend Neutral on the stock, with a Fair Value of
`578, valuing the base business at `449 at 2.2x CY2012E EV/Sales and have
attached `129/share for the Para IVs.
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