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Research
Ranbaxy Laboratories (RBXY IN, Mkt Cap USD3.4b, CMP INR438, Neutral) - Motilal Oswal
Posted On : 2013-05-10 01:35:53( TIMEZONE : IST )
Ranbaxy's 1QCY13 results were below estimates.
Key highlights:
- Core revenue grew 14% YoY to INR24.09b (v/s est of INR24.98b), while core EBITDA stood lower at INR1.75b (v/s est of INR2.24b). Adjusting for the one-off upside, adj PAT declined to INR904m (v/s est of INR1.37b), compared to INR2.02b last year.
- Operating performance was impacted by (1) generic Lipitor recall since Nov-12, resulting in adverse sales mix, (2) consent decree related costs and (3) promotional expenses. Adj PAT was impacted by (1) subdued operational performance, (2) higher forex loss on derivatives and (3) lower other income.
- Reported sales (including one-offs) declined 34% to INR25b (v/s est of INR25.89b), EBITDA declined 80% to INR1.9b (v/s est INR2.4b), while PAT stood at INR1.26b (v/s est INR1.98b). We estimate one-off contribution from generic Actos at INR911m to sales, INR155m to EBITDA and INR109m to PAT.
- Guidance: Management had earlier guided for INR120b of top line (including one-off sales) for CY13 (implying 2% YoY decline) to be aided by (1) 10% growth in core business and (2) contribution from multiple FTFs. While most of the cost pressures in 4QCY12 were discretionary, RBXY indicated that some of these may persist over the next few quarters. Core EBITDA margin improvement will be driven by (1) resolution of FDA issues, (2) resumption of generic Lipitor sales in 2QCY13, (3) increased focus on branded sales in emerging markets and (4) increasing contribution from Pristiq and Absorica.
Valuation and view: Based on 1QCY13 core performance, we have cut CY13E core EPS estimate by 8% and retained CY14E estimate. This primarily accounts for the slower-than-expected improvement in EBITDA margin and consent decree related costs impacting profitability in the short term. Stock trades at 27.8x CY13E and 20.4x CY14E core EPS. Our DCF value of all potential Para-IV upsides is INR48/share (assuming that none of the large FTF opportunities are lost under the consent decree). Maintain Neutral with a target price of INR430.
