Ranbaxy Lab - 1QCY2013 Result Update - Angel Broking

Ranbaxy Laboratories (Ranbaxy) reported a below expectation result during 1QCY2013. While the company's top-line de-grew by 34.2% during the quarter, the OPM came much below expectation at 4.0% (10.0% expected). The adjusted net income came in at Rs. 46cr. While the operating performance of the company continues to be impacted and the Management is confident on improving the operating performance, there is no clarity on the consent decree. So while the valuations have become attractive on EV/sales basis, we would wait for a few more quarters before we review the stock. So, as of now we remain Neutral on the stock.

Lower than expected performance: Ranbaxy reported net sales of Rs. 2,440cr, down 34.2% yoy, and below our estimate of Rs. 2,850cr. The gross margin declined by 14.0% to 63.2%, which aided the OPM to come in at 4.0% (including the forex losses), much lower than 24.9% in 1QCY2012. This was lower than our expectation of 10.0% for the quarter. This aided the adjusted net loss to be at Rs. 46cr.

Outlook and valuation: The stock is trading at an attractive valuations of EV/sales of 1.3x CY2014E. While the valuation is very 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

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