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Ranbaxy 3QFY02: A perspective - Views on News from Equitymaster
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  • Oct 10, 2001

    Ranbaxy 3QFY02: A perspective

    Ranbaxy is expected to declare its 3QFY02 results tomorrow. We expect the company to log a sales growth of 13-14%, driven mainly by export formulation growth. Domestic formulation sales are expected to grow around 9%. Operating margins are expected to improve atleast by 100 basis points, on the back of higher export revenues. However, the net profit is expected to be impacted due to new accounting policy on deffered taxation.

    (Rs m) 3QFY01 3QFY02E % Change
    Sales 4,759 5,411 13.7%
    Operating Profit (EBDIT) 786 953 21.2%
    Operating Profit Margin (%) 16.5% 17.6% 6.6%
    Profit before Tax 590 723 22.5%
    Tax 59 113 91.0%
    Profit after Tax/(Loss) 531 610 14.9%
    Net profit margin (%) 11.2% 11.3%  
    No. of Shares (eoy) (m) 116 116  
    Diluted Earnings per share* 18.3 21.0  

    The company is also expected to book profit on sale of its 50% share in Eli Lilly Ranbaxy Ltd to Eli Lilly. Ranbaxy has received approximately Rs 808 m (US$ 17 m) from Lilly on which the company is expected to record a profit of around Rs 736 m.

    Ranbaxy today announced generic launch of Ibuprofen-Pseudoephedrine combination tablets across US markets. The combination is a generic version of Advil, a cold and sinus drug with a market size of around US$ 48 m. This was one of Ranbaxy’s successful first-to-file Para IV approvals (this entitles the company to have six-month marketing exclusivity). On a conservative basis, we expect net profit of US$ 3.5 m from this launch spread over next six months.

    Going forward, Ranbaxy is all set to capture a larger pie of export formulations and generics market with a wide product basket and mature ANDA filings. Ranbaxy has the widest basket of 39 products targeted at the US generics market. Further, unlike other pharma companies, Ranbaxy has not restricted itself to the US markets and has positioned itself as an integrated player in the export markets. Again unlike others, Ranbaxy has invested huge sums in creating a direct presence in 25 countries across the globe through various subsidiaries. Apart from US, the company has identified UK, Brazil, China and Germany as its key markets.

    Further, Ranbaxy has filed ANDA's for Cefuroxime Axetil and Isotretinoin, (Para IV) for six month marketing exclusivity. If granted this could be a big earning opportunity for the company as combined branded sales for both the drugs are in excess of US$ 1 bn. We expect the company to earn US$ 30 m and US$ 65 m from Cefuroxime and Isotretinoin respectively. The litigation for Cefuroxime Axetil is currently on in the US and the launch of the drug would depend on the outcome of the litigation. Read more on Cefuroxime Axetil Opportunity.

    At the current market price of Rs 721, Ranbaxy is trading at 34x its estimated earnings for year ending Dec'01, excluding extraordinary income.

    Comparative Valuations
    Particulars CMP P/E (x)
      (Rs.) 2002E 2003E
    Ranbaxy 680 34 25
    Cipla 1046 24 19
    Dr.Reddy's 1836 21 16



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