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Ranbaxy: Sales on target, margins disappoint - Views on News from Equitymaster
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  • Jan 29, 2002

    Ranbaxy: Sales on target, margins disappoint

    Ranbaxy has declared a 26% rise in sales and 4% rise in net profit for the last quarter of FY02. While sales growth has been more or less in line with our expectations, the growth in operating margin for the fourth quarter has disappointed. Bouyed by a huge rise in export income, we were expecting operating margins in the range of 17%-18%. Consequently, the net profit for the year fell short of our estimates by Rs 160 m.

    (Rs m) 4QFY01 4QFY02 % Change FY01 FY02 % Change
    Sales 4,785 6,043 26.3% 17,418 21,267 22.1%
    Other Income 268 36 -86.6% 485 125 -74.2%
    Expenditure 4,401 5,252 19.3% 15,446 18,147 17.5%
    Operating Profit (EBDIT) 384 791 106.0% 1,972 3,120 58.2%
    Operating Profit Margin (%) 8.0% 13.1% 11.3% 14.7%
    Interest 0 96 0 615
    Depreciation 129 128 -0.8% 501 514 2.6%
    Profit before Tax 523 603 15.3% 1,956 2,116 8.2%
    Extraordinary Income/Provisions 0 0 0 660
    Tax 40 100 150.0% 147 375 155.1%
    Profit after Tax/(Loss) 483 503 4.1% 1,809 2,401 32.7%
    Net profit margin (%) 10.1% 8.3% 10.4% 11.3%
    No. of Shares (eoy) (m) 116 116 116 116
    Diluted Earnings per share* 16.7 17.3 15.6 20.7
    P/E (at current price) 42.9 35.9
    (*- annualised)

    For the full year, while domestic pharma division has grown by around 9%, more or less in line with market expectations, exports have registered a growth of 28% during the year. Last quarter has seen exports growing at a faster clip on the back of generic launch of Ibuprofen (combination) and Lorazepam in September’01. The Ibuprofen combination was the first successful Para IV approval from Ranbaxy’s stable. Also, Lorazepam is an anti-anxiety drug with market size close to US$ 400 m.

    The year was marked with considerable presence of one time (extra-ordinary) charges and income in the company's financials. In the first quarter of FY01, Ranbaxy received Rs 233 m (US $ 5 m) as technology licensing income from Bayer AG. Again in the third quarter, there was an extra-ordinary income of Rs 727 m on account of profit from sale of its stake in joint venture with Eli Lilly. The company booked Rs 300 m loss on account of its stock market activity through its subsidiary, Vidyut Investments. Other income which primarily consisted of interest income fell considerably during the year due to discontinuance of its stock market operations.

    The company has ramped up its product approvals in last few months for the International markets. The latest one being, generic manufacturing and marketing approval for all combinations of Lisinopril drug, which is a multi-billion cardiovascular molecule. The company currently has a basket of 44 products for the US markets, far ahead of any other Indian generic company. The company's strategy of targeted penetration in Germany, Brazil and UK also seems to be working well.

    Read more on Export strategy of the company.

    On a standalone basis, Ranbaxy has already achieved revenues in excess of US$ 440 m. The US subsidiaries of the company have recorded revenues to the tune of US$ 113 m, a growth of 74%. The company closed the year with a consolidated revenues of US$ 596 m. The international operations of the company which was hitherto in red has logged in profit before tax of close to US$ 7m. The company has already achieved critical mass in the International pharma scene. At the current market price of Rs 744, the stock is trading at a P/e of 36x FY02 earnings (on a standalone basis). Success in generics business and positive surprises on R&D front are likely to be key stock price triggers for the company going forward.



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    Apr 1, 2015 (Close)


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