Ranbaxy - 1QCY2012 Result Update - Angel Broking

Ranbaxy reported a lower-than-expected performance for 1QCY2012. While the company's top line came in 26.1% below our expectation, the contraction in OPM was more than expected, which aided the adjusted net profit to come in 36.3% lower than our expectation. We recommend Neutral on the stock.

Lower-than-expected performance: For 1QCY2012, Ranbaxy reported net sales of Rs.3,695cr, up 72.4% yoy, below our estimate of Rs.5,000cr. Gross margin came just in-line at 75.9%, expanding by 11.0% yoy. However, OPM expanded only by 7.9% to 25.0%, which was lower than our estimate. This was mainly on account of 171.2% yoy rise in other expenditure during the period. This aided the adjusted net profit to grow by 209.1% yoy to Rs.936cr.

Outlook and valuation: The stock is trading at EV/Sales (ex. FTF) of 2.7x CY2012E and 2.0x CY2012E. While the valuations are attractive in comparison to its peers, given the low profitability in the core business and uncertainty on the USFDA front, we maintain our Neutral rating on the stock.

Source : Equity Bulls

Keywords