Maintain 'reduce' on Ranbaxy – TP Rs.400 - Geojit BNP Paribas Financial Services

- 'Reduce' rating is maintained on Ranbaxy with an unchanged target price of Rs.400 over one year.

- Company's performance in 1QCY12 was weak except Lipitor. Sales of the generic 'Lipitor' in the range of USD 280 – 300 million was better than market expectations.

- Barring Lipitor sales, growth in sales disappointed in most geographies. In constant currency terms, sales were flat in Africa and sales in Latin America, Eastern Europe and the CIS declined yoy.

- India branded business picked up qoq and Asia – Pacific sales were driven by the generic Lipitor in Australia.

- For the quarter, margins expanded substantially despite the sales mix remained largely unchanged.

- However, this was due to higher contribution from Lipitor and currency benefits. Adjusting for this, improvement in core margin is only 100 bps qoq.

- If the currency gains and tax benefits are adjusted, core PAT is estimated at Rs.150 crore.

- Company's growth has been sluggish for the last many quarters and the stock seems expensive at the current market price.

- Reiterate reduce rating on the stock with a target price of Rs.400 over one year as against the current market price in the range of Rs.510.

Source : Equity Bulls

Keywords