Ranbaxy Laboratories Limited - More of the same; No signs of revival - Antique

Sales were 7% lower than our estimates because of anemic sales contribution from core base business especially the U.S. This despite the launch of Absorcica in the US where the company has gained a 9% marketshare again short of our 25% expectations. The company also received approval for Desevenlafaxine tablets under deployment and supply agreement with Alembic Pharma. It is a cheaper alternative to the currently marketed brand Pristiq and has a market size of USD590m for treatment of depression. The product was launched in April 2013. Adjusted for a forex gain of INR 462 mn, the operational core numbers continue to disappoint. The company missed our lowest on the street numbers by 7%, 23% & 47% respectively.(adjusted for a 47 crore forex gain). While the beat at PAT level was amplified by higher tax rates, the operational performance continues to disappoint. India primary sales growth was up 11% in rupee terms.

Valuation and Outlook


We continue to be negative on the stock. We are rolling forward our Price target to CY14 and continue to be negative on the stock on the back of a much weaker base business profile. We are also removing Diovan as an FTF opportunity given the unusual delay in approval from the US FDA. We value the stock at 19X CY14e EPS and have revised price target implying 13% downside from current levels making Ranbaxy still our Top "SELL" recommendation in the space. An improvement in base business margins, India growth rate catching up with the broader market growth rate remain key risks to our thesis.

Source : Equity Bulls

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