Ranbaxy Laboratories - Diovan FTF Sales Disappoint; Result Update Q3FY15 :: Edelweiss, report

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Ranbaxy Laboratories - Diovan FTF Sales Disappoint; Result Update Q3FY15 :: Edelweiss

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Ranbaxy Laboratories - Revival On Track; Result Update Q2FY15 :: Edelweiss

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Consider short strangle on Ranbaxy :: Business Line

UBS Investment Research-- Ranbaxy Pressures are in the price, Upgrade to Buy „

UBS Investment Research
Ranbaxy
Pressures are in the price, Upgrade to Buy
„ Valuations look compelling; Concerns seems overblown
We believe valuations have now turned attractive after a sharp 33% decline in
stock price over last 3 mths. We do not expect further disruption in the US business
due to potential ‘483’s for Mohali facility post inspection last year. We have also
gained more confidence that mgmt. is taking steps to address the low profitability
of the base business and expect margins to improve significantly over next 3 years.
We see US product approvals as the key trigger for the stock in the near term.
„ Absorica, higher utilization and cost control to help improve margins
We expect EBITDA margins to improve to 14.6% by CY15 from 7.8% in Q1CY13
driven by strong growth in US branded business (Absorica), step down in
remediation spending by end CY14, cost control and better utilization of mfrg.
facilities. Absorica continues to steadily gain market share in Isotretnoin market.
We expect US branded business to account for ~50% of CY15 EPS.
„ Expectations low – resumption of approvals will be the key trigger
We cut our CY13 EPS by 38% as we build in Rs 5bn of FX losses due to INR
depreciation. We expect approval for Diovan and Valcyte in CY13. Mgmt. expects
to maintain its exclusivity for Diovan despite the delay in approval. We note that
ex FTF’s Ranbaxy has not won any generic approvals from the USFDA since
2009. Resumption of approvals therefore will be a key upside trigger for the stock.
„ Valuation: Upgrade to Buy, Maintain Price target of Rs 400
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%.

Ranbaxy Labs Sell Target Price: Rs331 ::Centrum

Ranbaxy Labs

Sell

Target Price: Rs331

CMP: Rs385

Downside: 14.0%

Disappointing results

Ranbaxy Labs’ (RLL) revenues for Q4CY12 were in line with our expectations but EBIDTA margin and net profit were way below. The company reported sales decline by 29%YoY, 2,020bps drop in EBIDTA margin and net loss of Rs1.27bn before EO items. Sales were affected by the absence of one time FTF sale of generic Lipitor in the US market. This, along with re-structuring, pulled down the EBIDTA margin by 2,030bps. RLL has provided Rs1.86bn for the voluntary recall expenses for generic Lipitor. We have revised our rating from Neutral to Sell with a revised target price of Rs331 (based on 20x CY13E EPS of Rs16.3+ FTF of Rs5.4).

m  Decline in US revenues: RLL reported 35%YoY decline in outside India revenues from Rs32.48bn to Rs21.23bn due to the absence of FTF opportunity of generic Lipitor in the US which generated revenues of ~$310mn(Rs16.7bn) in Q4CY11. Revenues in N. America declined by 61%YoY from $407mn to $160mn due to the absence of FTF opportunity of generic Lipitor. Revenues in India grew by 9%YoY from Rs5.04bn to Rs5.48bn in line with market growth.

m  Sharp drop in Margin: RLL’s EBIDTA margin declined by 2,020bps YoY from 23.2% to 3.0% due to the increase in material and personnel cost. The company’s material cost increased by 1,520bps from 27.4% to 42.6% of revenues due to the absence of FTF of generic Lipitor. RLL’s personnel cost grew by 770bps from 10.1% to 17.8% due to sharp decline in revenues. Other expenses declined by 260bps from 39.3% to 36.7% of revenues. RLL reported Rs282mn forex loss against Rs906mn from operations and Rs820mn against Rs578mn on loans. The company’s EBIDTA margin declined by 2,340bps over the last three quarters.

m  High voluntary recall charges:  RLL provided Rs1.86bn as voluntary recall charges for 41 lots of generic Lipitor in the US due to the presence of foreign particles. The company also provided Rs1.80bn as forex loss on $1.07bn derivative contracts resulting in total EO amount of Rs3.66bn.

m  Additional FTF opportunities:  RLL has filed for 5 additional FTF opportunities in 2012 with an aggregate market size of $4.3bn (Rs232bn). We expect these opportunities to drive future growth.

m  Valuations: We expect RLL’s margin to be under pressure in the coming quarters due to the loss of MS due to the voluntary recall of generic Lipitor in the US and slower growth in the domestic market.  Moreover, the resolution of import alert by US FDA for Dewas and Paonta Sahib facilities will be gradual.  We have revised our EPS estimates for CY12 and CY13 downwards by 27% and 43% respectively due to lower margins. At the CMP of Rs385, the stock trades at 17.7x CY13E EPS of Rs21.7 and 20.5x CY134E EPS of Rs18.8. We have revised RLL’s rating from Neutral to Sell with a revised target price of Rs331 (based on 20x CY13E base EPS of Rs16.3+ FTF of Rs5.4) with 14% decline over the CMP.

Thanks & Regards, 

-- 
-- 

Ranbaxy Labs:: Head - Investor Relations meeting by Centrum

We recently interacted with the Head - Investor Relations to get the
latest update on the company. The key highlights were:
Good growth in N. America and CIS: For Q3CY12, Ranbaxy Labs (RLL) has achieved growth in
revenues of 62%YoY for N. America, 81%YoY for CIS, 30% for W. Europe and 13% for India. However,
the growth in other geographies was subdued with Asia Pacific at -44% and Africa -6%YoY.
Good growth in the US: RLL performed well in Q3CY12 in the US market despite the difficult
situation. Generic atorvastatin achieved a market share of ~44%. However, the market
witnessed price erosion of 98.0-98.5% due to competition from Apotex, Mylan and Dr. Reddy’s
Labs. RLL had to recall 41 lots of generic atorvastatin during the quarter, due to the presence
of glass particles of <1mm and="" company="" corrective="" has="" in="" measures="" p="" relaunch="" size.="" taken="" the="" will="">the product soon.
Other opportunities in the US: RLL launched AG of Actos of Takeda in Q3CY12 and achieved
~30%MS. It also launched generic Caduet in May’12. The company is looking forward to FTF
opportunity of generic Nexium (patent holder: Astra Zeneca). RLL has achieved over 30%MS
for generic atorvastatin, donepezil and valacyclovir. The company has launched Absorica
Capsules for the treatment of acne in the US based on its NDA.
Emerging markets a good opportunity: RLL derives ~60% of its revenues from emerging
markets and has a strong presence in India, CIS, Africa and Asia Pacific. The company markets
branded generic products in these markets and expects double digit growth here. RLL has a
field force of ~5,200 MRs and is ranked 4th in the domestic market. The company focuses on 60
products in the domestic market. Its major OTC products Volini and Revital are doing well. The
company has launched Volini Duo for pain relief and swelling. It has launched Revital Women
and Revital Elder as line extensions.
S. African sales decline: RLL’s S. African business witnessed 6%YoY decline in revenues in
Q3CY12 as the company is moving away from ARV tender business. The company has
segregated East Europe and CIS as emerging markets with focus on profitability. RLL has
achieved double digit growth in Romania but is facing pressure due to the service tax.
Manufacturing facilities under US FDA scanner: RLL’s manufacturing facility at Dewas and
Paonta Sahib continues to face decrees from the Department of Justice (DoJ), US. The
company has appointed external auditors for baseline audit to take remedial measures. The
company has filed 8-10 ANDAs from Mohali SEZ and Ohm Labs, US and is awaiting the relaunch
of generic atorvastatin.
Impact of NPPP: Being among the leaders in the domestic market, the company is likely to
get impacted by NPPP. However, the company expects clarity for 5-year period. RLL expects to
increase prices for drugs outside NLEM in the coming years. The company expects growth to
come from increase in volume and new product launches.
Product basket of Daiichi Sankyo: The company has launched 6-7 innovative products of
Daiichi Sankyo (DIS) in various markets and is working on a hybrid model in various markets.
No major capex: RLL had no major capex in CY12 except maintenance capex of ~$110mn
(Rs6.05bn). The company has made a provision of $500mn (Rs27.5bn) for the liabilities arising
from DoJ for its Dewas and Paonta Sahib manufacturing facilities.
Derivative contracts: RLL has brought down the derivative contracts from $4.5bn (Rs248bn) to the
current level of $1.2bn (Rs66.0bn). These remaining contracts will expire by 2015. The contract
maturity is $40mn (Rs2.2bn) per month. RLL expects minimisation of volatility in the performance.
However, these contracts impact MTM loss/gains quarterly but have no effect on cash flows.
Our Estimates:
At the CMP of Rs496, the stock trades at 13.3x CY12E EPS of Rs37.3 (base business Rs25.3 and
FTF Rs12.0) and 16.8x CY13E EPS of Rs29.6 (base business Rs24.3 and FTF Rs5.3).
We have a Neutral rating for the scrip with a target price of Rs563 (23x CY13 base EPS of
Rs24.3+ FTF EPS of Rs5.3) with an upside of 14% over CMP.

Ranbaxy Laboratories Launch of Absorica – A new beginning ::Prabhudas Lilladher

􀂄 Launches Absorica (Isotretinoin) in the U.S: Ranbaxy’s launch of Absorica
(Isotretinoin) in the US is a key event as we believe that the product will become
the largest selling product for the company in the US latest by 2014 (excl. FTF
products). The company has licensed this product from Cipher, a Canadian
company. Absorica is indicated for the treatment of severe recalcitrant nodular
acne in patients who are 12 years of age and older.
􀂄 Absorica is a beginning in the quest to regain loss of revenue in US due to
USFDA issues: Apart from FTF launches, Absorica is a major product launch since
the company’s US business was impacted by USFDA ‘Import Alert’ in 2008.
Before the USFDA issues cropped up at Ranbaxy, Isotretinoin was the largest
selling product for the company, with annual revenue of ~US$100m in 2007.
However, the company had to discontinue the product due to import alert on
Dewas and Paonta Sahib facilities in 2008. Apart from being the largest selling
product, it was one of the most profitable one for the company due to limited
competition and branded nature of the product
􀂄 Even after four years, the opportunity remains attractive: Despite Ranbaxy
being out of this product market for the last four years, Isotretinoin remains a
lucrative market with limited competition due to complexities involved in the
development and manufacturing of the product. Currently, there are only three
generic companies selling Isotretinoin in US viz. Teva, Mylan and Douglas
Pharma, with Teva holding majority market share. The total market size of the
product is ~US$400m. Now with the entry of Ranbaxy, it becomes a four-player
market.

Technicals: Ranbaxy, Thermax, NHPC, Gujarat Fluorochem, Kalpataru Power, Kolte-Patil Developers : Business Line

Sizzling Stocks: Blue Dart Express, RANBAXY LABORATORIES

Good growth from US business- Ranbaxy Labs :: Centrum

Good growth from US business
Ranbaxy Labs’ (RLL) results for Q3CY12 were lower than our expectations for
revenues but higher for EBIDTA and net profit. The company reported a growth of
28%YoY in revenues, 410bps in EBIDTA margin and net profit of Rs3.61bn before
EO items. The sales growth was driven by N. America (35% of revenues), which
grew by 62%YoY due to the launch of authorised generic of Actos in the US and
favourable currency movement. RLL’s overall forex gain was Rs4.62bn during the
quarter. We have Neutral rating for the scrip with a revised target price of Rs563
(based on 23x CY13E EPS of Rs24.3+ FTF of Rs5.3).
Strong growth in US revenues: RLL reported 62%YoY growth in N. American
revenues from $103mn to $167mn. The company’s India revenues grew by
11%YoY from Rs5.32bn to Rs5.88bn in line with the market growth rate of ~12%.
Margin improvement: RLL’s EBIDTA margin improved by 410bps YoY from 8.9%
to 13.0% due to the reduction in personnel cost and other expenses. The
company’s material cost increased by 10bps from 38.5% to 38.6% of revenues.
RLL’s personnel cost declined by 200bps from 19.4% to 17.4% due to higher sales
growth. Other expenses declined by 220bps from 33.2% to 31.0% of revenues. RLL
reported Rs3.93bn forex gain against forex loss of Rs3.63bn from the derivative
contracts.

Ranbaxy Laboratories: Hold :: Business Line

Tata Motors, Ranbaxy, Sun TV: reports by Kotak Securities

Tata Motors: JLR to be key beneficiary of SUV boom

Ranbaxy Laboratories: Generic Diovan approval delayed

Sun TV Network: FY2012 annual report analysis: A painful transition

Buy Ranbaby, Bhel:: IIFL

BHEL (BUY, above Rs255, Target Rs265):
BHEL on the daily chart has negated ‘Hanging Man’
pattern on candlestick after prices managed to
post a positive closing despite lower opening on
Wednesday. A move past Rs255 would ensure that
rally has good potential to test levels of Rs269
which turns out to be long term resistance. The
RSI despite entering into overbought position no
showing signs of faltering out and momentum
could extend higher in coming days. We
recommend buying BHEL above Rs255 with
stoploss of Rs250 for Target of Rs265.
(Duration 7 days).
Ranbaxy (BUY, above Rs536, Target Rs552):
Ranbaxy has been consolidating near the support
zone of Rs525 after it peaked out at Rs568 in
early September 2012. Currently stock price has
been hovering near the support of 50 DMA from
which sharp rally is expected in the near term.
Recent volumes is also on the higher side with
daily candlestick taking shape of ‘Bullish Harami’
formation. A move past Tuesday’s high has decent
potential to trigger sharp rally in the counter. We
recommend buying Ranbaxy above Rs536
with stop loss of Rs528 for Target of Rs552.

Buy Ranbaxy Laboratories :: Prabhudas Lilladher

India's largest pharmaceutical company with presence in 23 of the top 25
pharmaceutical markets of the world
Global footprint in 46 countries, world-class manufacturing facilities in 7
countries and serves customers in over 125 countries
Focus on Anti-infective, Urology, Respiratory, Anti- inflammatory and
Metabolic disorders segments (acute segment contributes >70% to overall
domestic business)
Became subsidiary of Daiichi Sankyo (DS), one of the largest
pharmaceuticals companies in Japan, in 2008 (acquired Ranbaxy stake for
US$ 4 bn, at price of Rs 735 per share)
Pursuing Hybrid business model
In talks with USFDA to resolve issues surrounding its Dewas and Paonta
Sahib facilities (created US$ 500 mn provision towards settlement with
DOJ)
Entered into Vaccines/Biotech space with Biovel acquisition in 2010 in
India. Focusing on Hybrid model by launching Daiichi pipeline products in
key strategic markets (including India, Romania, Spain, Mexico)
Recently received USFDA clearance for its Mohali facility

Infosys, Tata Motors, ranbaxy:: Kotak Sec, PDF link

Infosys: Return to reasonable growth may have to wait
Tata Motors: 2013 Range Rover unveiled
Ranbaxy Laboratories: Ranbaxy launches Actos AG

Ranbaxy- Leveraging Impending Opportunities: Karvy

Leveraging Impending Opportunities
Ranbaxy Laboratories, is positive on impending opportunities like CIPIsotretinoin,
Atorvastatin and others. Derivatives as an overhang will decline
15 % by Apr’13, Ranbaxy will be able to leverage rest of the revenues at
better realizations. We upgrade our rating on the stock to “BUY”..
CIP‐Isotretinoin: This branded prescription product is likely to be launched
in Q4CY12 and scale up will happen only in CY13. We believe the product
had revenues of US$60‐70 mn before the product was withdrawn. We
upgrade our revenues from the same to US$15 mn (vs. US$10 mn) in CY12E
and to US$75 mn (vs. US$60 mn) in CY13E.

Annual Report Analysis - Ranbaxy Laboratories : Edelweiss, PDF link

Ranbaxy Laboratories (Ranbaxy) reported loss of INR29bn during CY11, primarily due to provision for settlement with US Department of Justice (DoJ) and forex losses on currency options and loans. With depreciation in INR continuing in Q2CY12, forex losses are likely to continue. Cash conversion cycle improved purely on the back of high creditor days of 224 in CY11 (CY10: 174), but looks unsustainable.

Angel Broking - Ranbaxy - RU1QCY2012- Result Updates - PDF link

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Ranbaxy - RU1QCY2012

Ranbaxy Labs: Risk-reward turns less favourable :JM Financial,

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Risk-reward turns less favourable
Base margins appear to have improved: Ranbaxy reported 1QCY12 net
profits of `12.5bn (310% YoY). This included US Lipitor sales of $306mn
(JMFe). Adjusting for Lipitor net profits of `5.6bn and post-tax MTM forex
gains of `940mn (`750mn as part of the other income + `190mn as part of
the interest expense), adjusted net profit was `2.4bn (300% YoY; JMFe:
`1.0bn). Base sales at $430mn (9% YoY) were 9% below JMFe. Adjusted EBITDA
(excl Lipitor) at `3.4bn appear higher than JMFe (`2.4bn) primarily on account
of lower raw material costs. Base RM margins have improved almost by
180bps on a sequential basis. Management mentioned that this improvement
will sustain. The improvement was due to various factors such as product mix,
level of imports and currency. Staff costs were in-line with JMFe. The payment
to Teva as part of the Lipitor launch may have remained at levels similar to
4QCY11 (c.50%). Given the presence of significant FTF revenues (along with
the profit share with Teva) and currency volatility, it may be difficult to identify
the drivers for the improvement in base margins. R&D expense was $22mn for
the quarter.
Update on consent decree in 3QCY11: Domestic sales at $99mn grew by
13% in INR terms. The growth in consumer division ($15mn) was strong at
20%. Slower growth in domestic market is due to higher exposure to antiinfectives.
Base US sales at $95mn are likely to be driven by Caduet and
Nexium supply. In the Atorva market, Ranbaxy has a 47% share with 60-70%
price erosion. Sales of Atorva from Mohali are not reflected in 1Q12 numbers.
Ranbaxy will provide an assessment of additional costs to implement the
consent decree in 3QCY12. The company has finalized the consultants who
are expected to visit the facility in 2QCY12, post which the FDA inspection is
expected. Ranbaxy reiterated that large scale infrastructure additions may not
be required as part of the consent decree process given the investments done
by the company over the last couple of years. The company did not provide
any capex guidance but expects investments to be higher than CY11. It plans
to set up a facility in Nigeria during the current year.
Maintain BUY; increase Dec’12 TP to `540: We increase CY12/13E EPS by
32%/13% primarily due to higher margins. We increase our Dec’12 TP to `540
from `485. Our TP is based on 18x CY13 EPS (`26) and P-IV value of `70. The
US PDUFA date for Isotretinoin is scheduled for 29th May’12 which is a near
term trigger. Our estimates already factor sales from this product in CY13.