Ranbaxy: Attracting attention - Views on News from Equitymaster

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Ranbaxy: Attracting attention

Sep 2, 2000

Ranbaxy has started to attract the market’s attention again. The stock has gone up by almost 15% over the last month. This despite the company declaring uninspiring results in the first half of the current year.

Uninspiring first half
(Rs) 1HFY99 1HFY00 Change
Sales 7,614 8,142 6.9%
Other Income 35 27 -22.9%
Expenditure 6,351 7,072 11.4%
EBDIT 1,263 1,070 -15.3%
OPM 16.6% 13.1%  
Interest 112 7 -93.8%
Depreciation 219 247 12.8%
PBT 967 843 -12.8%
Tax 48 55 14.6%
PAT 919 788 -14%
NPM 12.1% 9.7%  
No of shares 116 116  
EPS 16 14  
(Annualised)      

Despite a 7% rise in the turnover the company’s net profit has fallen marginally. The reasons for this are not far to seek. Ranbaxy depends a lot on antibiotics with almost 40% of the company’s domestic turnover accruing from this segment. With the segment witnessing heavy competition from unbranded generics, the company’s turnover growth as well as margins have been under strain.

Why then has the stock risen? The market seems to have taken note of an impending $ 5 mn (approximately Rs 225 m) payment receivable from Bayer that is likely to come in the third quarter of the current year.

Also, the company, at an analysts presentation in October 1999 had mentioned that the company was conducting phase I trials for a new chemical entity 'Parvosin' (codenamed RBx 2258) which was for Benign Prostrate Hyperplasia. Dr Brian Tempest, President Ranbaxy Pharmaceutical has also given a statement to the effect that Parvosin is to be launched shortly.

The management in its analysts presentation had also specified that there are three other molecules, one of which was RBx 4638 for respiratory diseases. It is quite possible that some announcement is expected from the company soon.

A further rise in the stock would depend on a positive announcement in the coming month.

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