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Ranbaxy: Right growth prescription` - Views on News from Equitymaster
 
 
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  • Jul 24, 2003

    Ranbaxy: Right growth prescription`

    Ranbaxy has recorded an 11% increase in revenues and a strong 42% increase in bottomline. Exports constituted 64% of the total revenues. For 1HFY04, Ranbaxy has reported a 51% increase in topline and 59% increase in bottomline.

    (Rs m) 2QFY03 2QFY04 Change 1HFY03 1HFY04 Change
    Net Sales 7,448 8,277 11.1% 13,158 19,174 45.7%
    Other Income 25 931 3624.0% 55 987 1694.5%
    Operating expenses 5,827 6,642 14.0% 10,584 14,112 33.3%
    Operating Profit (EBDIT) 1,621 1,635 0.9% 2,574 5,062 96.7%
    Operating Profit Margin (%) 21.8% 19.8%   19.6% 26.4%  
    Interest (net) 53 17 -67.9% 181 23 -87.3%
    Depreciation 203 188 -7.4% 401 367 -8.5%
    Profit before tax and extraordinary items 1,390 2,361 69.9% 2,047 5,659 176.5%
    Extra-ordinary Items 356 48 -86.5% 920 97 -89.5%
    Tax 362 441 21.8% 634 990 56.2%
    Profit after Tax 1,384 1,968 42.2% 2,333 4,766 104.3%
    Net profit margin (%) 18.6% 23.8%   17.7% 24.9%  
    No. of Shares (eoy) (m) 116.0 185.0   116.0 185.0  
    Diluted earnings per share* 29.9 42.6   25.2 51.5  
    P/E ratio   19.1     15.8  
    (* annualised)            

    Other income has seen a sharp rise on account of the the company receiving its share of revenues from Bayer for the sale of Ciprofloxacin OD. An increase in the R&D expenditure from Rs 365 m to Rs 486 m has resulted in a marginal drop in the operating margins.

    Consolidated results snapshot
    Rs m 2QFY03 2QFY04 Change
    Sales 9,585 11,349 18.4%
    Operating Profit 2,061 3,130 51.9%
    Operating Margins (%) 21.5% 27.6%  
    Net Profit 1,709 2,062 20.7%
    Net Margins (%) 17.8% 18.2%  

    Ranbaxy had restructured its debt portfolio by borrowing US$ 10 m through the ECB route and repaying its high cost debt. The company has thus been able to bring down its interest cost by 38%. This coupled with a drop in the depreciation expenses has helped Ranbaxy record a sharp improvement in its net margin. On a consolidated basis, Ranbaxy has registered an 18% growth in the topline and a 21% increase in the bottomline during the quarter.

    The stock is currently trading at Rs 812 implying a P/E of 16x its annualised 1HFY04 earnings. Considering Ranbaxy’s strong growth potential in the generics segment, which has been given a boost with the US government reducing the time period for drug approval and the inclusion of generics in the US government sponsored 'Medicare' policy, combined with its focus on developing a strong NCE and ANDA pipeline, the company has good long-term prospects. However, the risk profile of the stock is also on the higher end given the inherent risks involved in NCE research and complex regulatory procedures on the ANDA front.

     

     

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