Ranbaxy net falls 5% despite 15% rise in topline - Views on News from Equitymaster

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Ranbaxy net falls 5% despite 15% rise in topline

Jul 29, 2000

Despite a 15% rise in the topline, Ranbaxy's bottomline has dropped 5% in the second quarter of the current year.

(Rs m) 2QFY99 2QFY00 Change
Sales 3,695 4,236 14.6%
Profit before Tax 464 437 -5.8%
Tax 39 33 -15.4%
Profit after Tax/(Loss) 425 404 -4.9%
Net profit margin (%) 11.5% 9.5%  
No. of Shares (m) (eoy) 115.9 115.9  
Diluted no. of shares (m) 115.9 115.9  
Diluted Earnings per share* 14.7 13.9  
*(annualised)      

The reasons for this are not far to seek. With dependence on antibiotics at around 55% of the company's turnover, the margins are bound to be under pressure due to heavy congestion in the antibiotics market.

Surprisingly, the company's domestic sales have grown over 16.5% in the current quarter while the exports have grown by 12.6%. One reason for this is the fact that the company is changing the compostion of its exports from bulk actives to generic formulations and in the transition period the growth has fallen.

This is the second consecutive quarter where the company's profit has fallen and with the overall pharmaceutical market, especially the antibiotic market, still in a swoon not much can be expected from the remaining quarters as well. Perhaps the only way out for the company would be the licensing of the BPH compound, but around nine months ago at an analysts meet the management had clarified that the development of the compound would take around eighteen months.

The stock quotes at Rs 551 which implies an earning multiple of 39.6 times second quarter annualised earnings.


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