• APRIL 30, 2001

Ranbaxy: Extraordinary income propels growth

Ranbaxy Laboratories, the domestic pharma major declared 47% increase in net profits. This was more than proportionate in light of only 19% growth in topline for 1QFY02. It was propeled by Rs 233 m income from technology licensing to Bayer. Excluding this extraordinary income, net profit infact, recorded a negative growth of 13%. Operating margins also dipped by 100 basis points inspite of an impressive 30% growth in export sales.The dip in operating margins appears to be on account of lower realisations in anti-infective segments.

(Rs m) 1QFY01 1QFY02 % Change
Sales 3,756 4,457 18.7%
Other Income 260 166 -36.2%
Expenditure 3,318 3,981 20.0%
Operating Profit (EBDIT) 438 476 8.7%
Operating Profit Margin (%) 11.7% 10.7% -8.4%
Interest 168 133 -20.8%
Depreciation 124 128 3.2%
Profit before Tax 406 381 -6.2%
Extraordinary Income - 233 -
Tax 15 40 166.7%
Profit after Tax/(Loss) 391 574 46.8%
Net profit margin (%) 10.4% 12.9%  
No. of Shares (eoy) (m) 116 116  
Diluted Earnings per share* 13.5 19.8  
P/E (at current price) 37.5 25.6  
(*- annualised)      

Other Income dipped primarily as the company didnít book any income from its subsidiary, Vidyut Investments compared to Rs 160 m in the corresponding quarter last year.Though we expect the net effect of all subsidiaries/joint ventures to be positive for the full year, the figure is still in the red to the tune of Rs 25 m (approx.) for 1QFY02.

On the R &D front Ranbaxy is in the Phase II trial for BPH molecule whereas animal studies for asthma molecule are expected to start by the end of the first half of the current year. R & D expenses increased marginally in the first quarter (6%). Meanwhile the company has also developed once a day NDDS for ofloxacin, an anti-infective drug.

At the current market price of Rs 506, the stock is trading at a P/e multiple of 30 times its FY02E earnings. The future potential of the stock depends on what breakthrough the company is able to achieve through its R &D work (particularly NDDS in the near term) as also the performance of the company in grabbing a share of US generics market cake.

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