Ranbaxy Laboratories - March 2013 Results Preview - Motilal Oswal

- We expect Ranbaxy Laboratories (RBXY) to post 18% YoY growth in core top line for 1QCY13E at INR24.98b driven by strong 40% growth in core US sales over a low base of 1QCY12.

- Core EBITDA is expected to grow just 6% YoY to INR2.24b, mainly due to declining profitability in the base business, higher R&D and other expenses. Core EBITDA margin would expand by 100bp YoY to 9%.

- We expect adjusted PAT to decline 32% YoY to INR1.37b, mainly led by subdued operational performance and lower other income. RBXY had reported a forex gain of INR940m in 1QCY12, against which we expect a forex gain of INR159m for this quarter.

RBXY is valued at 26.1x CY13E and 20.7x CY14E core EPS. Our current DCF value for all potential Para-IV upsides is INR48/share. Management has not given any further update on the timeline for resolution of US FDA issues. We believe the outlook for RBXY remains challenging as quality/compliance issues have impacted operations and will weigh on investor confidence. It is imperative for the company to improve core business margins as one-offs wane in the coming quarters. Maintain Neutral.

Source : Equity Bulls

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