Ranbaxy - RU1QCY2011 - Buy

Dear All,

 

Forwarding you the Result Update on Ranbaxy for 1QCY2011 with a Buy recommendation and a Target Price of ` 593 (12 months).

 

 

Ranbaxy reported better-than-expected 1QCY2011 results. The decline in the top line as well as the bottom line was much lower than expected. With higher contribution of FTFs in 1QCY2010, there is no like-to-like comparison due to the high base effect. However, excluding this effect, the base business reported double-digit growth for the quarter. Sustained performance by the company’s key geographies was witnessed during 1QCY2011. Lack of clarity on the timeline of the resolution of USFDA and DOJ issues (now pending for more than two years) persists with no comments from the management regarding the penalty amount to be imposed by the USFDA. We continue to maintain our estimates with a Buy recommendation on the stock.

Better-than-expected 1QCY2011 results: Ranbaxy reported net sales of `2,143cr, down 13.6% yoy, just in line with our estimates of `2,164cr. Gross margin fell by 512bp yoy to 65% (70%) but was higher than our estimate of 59%. OPM for the quarter stood at 17.0% (28.4%), higher than our estimate of 11.7%. The company reported a drop of 68.3% yoy in its net profit to `304.3cr (`960.5cr), which was lower than our expectation of an 85.2% drop for 1QCY2011.

 

Outlook and valuation: The stock is trading at EV/Sales (ex. FTF) of 2.8x CY2011E and 2.2x CY2012E. We maintain our Buy recommendation on the stock with a revised target price of `593, valuing the base business at `483 at 2.2x CY2012E EV/Sales and attaching `110/share for Para IVs.

 

 

 

Kindly click on the following link to view the Report.

 

Ranbaxy - RU1QCY2011

 

 

If you have any further queries, feel free to call us on 022 39357600 Ext: 6865 or mail us at advisory@angelbroking.com

 

With best regards,

Fundamental Advisory Desk

Angel Broking

Akruti Star,5^th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.

Call         : (91) (022) 39357600, Ext: 6865

Website  : www.angelbroking.com

 

Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.

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