Ranbaxy Laboratories Limited - Signs of Revival; The trough finally arrives - 2QCY13 Results Review - Antique

After several quarters of sub-par operational performance, Ranbaxy reported better than expected results driven by notable improvement in base business performance. Adjusted for one-off charges on account of MTM losses and a consequent net charge of Rs.5,403 Mn during Q2’13,the base business growth and Margin profile showed visible signs of bottoming out. When adjusted for 170mn$ in Lipitor sales for the corresponding quarter in the U.S ,revenue growth of 32% YoY (driven by Absorica), looks inspiring. Base business EBITDA margins of 10.4% are the best that the company has recorded in last 8 quarters.

Upgrade to Buy; Absolute Return idea

Given the sharp price correction, the stock at current market price trades @ 12 x CY14 EPS making it the cheapest frontline Pharma stock. A stabilizing earnings trajectory and the fact that the impact of regulatory censure has already played out, we upgrade the stock to a Buy. We value the stock at 16 x CY14 EPS to arrive at a Price Target of Rs 381 implying a 36% upside from current levels. We value one time opportunities on a NPV basis.

Source : Equity Bulls

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