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Ranbaxy Laboratories 3QCY2012 performance highlights and results update

Contributed by Angel Broking

Ranbaxy Laboratories (Ranbaxy) reported a just–in–line performance in its 3QCY2012 results. While the company’s top-line grew 31.0% during the quarter, the OPM came below expectation at 11.7% (13.5% expected). The adjusted net profit still came in at Rs.387cr. We recommend a Neutral stance on the stock.

Just- in-line performance: Ranbaxy reported net sales of Rs.2,651cr, up 31.0% yoy, and above our estimate of Rs.2,768cr. The gross margin expanded by 86bp to 60.8%, which along with a lower rise in the staff and other expenditure aided the 6.4% rise in the OPM, which came in at 11.7%. This was lower than our expectation of 13.5% for the quarter. This aided the adjusted net profit to come in at Rs.387cr.

Outlook and valuation: The stock is trading at EV/sales of 1.9x CY2013E. While the valuation is attractive in comparison to its peers, given the low profitability in the core business and uncertainty on the USFDA front, we maintain our Neutral rating on the stock.