Ranbaxy Laboratories - Strong results driven by Lipitor; muted guidance; Maintain 'SELL'; TP Rs337 - PINC Research

Q4CY11 Result Review - Ranbaxy Laboratories

Strong results driven by Lipitor; muted guidance

Ranbaxy's Q4CY11 results were better than our estimates driven by higher sales of generic Lipitor and marginal improvement in the base EBITDA margins. We expect Ranbaxy to have filled 2-3 months of inventory of generic Lipitor in the channels. Ranbaxy currently has market share of ~42% in generic Lipitor with price erosion to the tune of 60-70% (bit negative). The base EBITDA margin is expected to be in range of 10-11%. The company has given a muted guidance of USD2.2bn for CY12 (includes sales of generic Lipitor and Nexium).

- Sales growth ahead of estimates

- Base margins improves marginally

VALUATIONS AND RECOMMENDATION

We have revised downwards our recurring sales and margins estimates for CY12 and CY13 by 3-7% to factor in slower growth across geographies. We recommend 'SELL' on the stock and value the core business at Rs310/share (22x one year forward recurring earnings), FTF pipeline at Rs82/share and reduce Rs55/share for the penalty provision resulting in revised SOTP based target price of Rs337.

Source : Equity Bulls

Keywords