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Ranbaxy Labs 5QFY2014 performance highlights and results update

May 12, 2014, Monday, 18:25 GMT | 13:25 EST | 22:55 IST | 01:25 SGT
Contributed by Angel Broking


For 5QFY2014, Ranbaxy Laboratories (Ranbaxy)’s numbers came in below our expectations. For the quarter, the company posted sales of Rs.2,436cr V/s an expected Rs.2,657cr, posting a dip of 0.2% yoy (Rs.2,440cr in 1QFY2014). On, the operating front, the OPM came in at 4.9% V/s an expected 6.4% and V/s 4.0% in 1QCY2013. The other income for the quarter dipped by 55.8% yoy. This, along with higher taxation, led the company to post a net loss before exceptions of Rs.93cr (V/s a profit of Rs.46cr in the corresponding period of last year 1QFY2014). This is much lower than our expectation of a net profit of Rs.240cr for the period. We recommend a Neutral rating on the stock; however, if the merger cruises through the legal hurdles, the stock could trade at a fair value of Rs.514.

Below-expected performance on OPM front: Ranbaxy posted numbers below our expectations for 5QFY2014. For the quarter, the company posted sales of Rs.2,436cr V/s an expected Rs.2,657cr, posting a dip of 0.2% yoy (Rs.2,440cr in 1QFY2014). While the quarterly sales have come lower than expected, the company met its annual guidance of sales of Rs.13,000cr for FY2014. Its key market, USA, grew by almost 13% yoy during the quarter. On the operating front, the OPM came in at 4.9% V/s an expected 6.4% and V/s 4.0% in 1QFY2014. The other income for the quarter dipped by 55.8% yoy. This, along with higher taxation, led the company to post a net loss before exceptions of Rs.93cr (V/s a profit of Rs.46cr during the corresponding period of last year 1QFY2014. This is much lower than our expectation of a net profit of Rs.240cr for the period.

Outlook and valuation: The company has a major portion of its facilities under the USFDA import alert and any major recovery in sales and profitability will likely take time. While the company has been trading at a discount to its peers, but after the announcement of its merger with Sun Pharma, we believe the stock will mirror the movements in the Sun Pharma stock. As regards shareholders of Ranbaxy, we believe that they would benefit from their investments, given the synergies and the positives emanating from the deal. We recommend a Neutral rating on the stock; however, if the merger cruises through the legal hurdles, the stock could trade at a fair value of Rs.514.