Stock Market Result Update on Ranbaxy for 2QFY2012 with a Buy recommendation and a Target Price of `577 (12 months).
Ranbaxy reported a lower-than-expected performance for 3QCY2011. While the company’s top line was more or less in-line with our expectation, its bottom line came in much lower than our expectation on the back of below-expectation OPM. The company’s OPM during the quarter dipped to 5.0% vis-à-vis our expectation of 6.7%. Management is optimistic of monetizing Lipitor and other key FTFs in the US. We recommend Buy on the stock.
Lower-than-expected performance: Ranbaxy reported net sales of `2,023cr, up 7.4% yoy and just in-line with our estimate of `2,143cr. Gross margin also came just in-line at 58.2%, lower than our estimate of 60%. Ranbaxy reported OPM of 5.0%, which was lower than our estimate of 6.7% for the quarter. This along with forex loss of `613cr led to loss of `400cr during the quarter.
Outlook and valuation: The stock is trading at EV/Sales (ex. FTF) of 2.2x CY2011E and 1.7x CY2012E. We recommend Buy on the stock with a revised target price of `577, valuing the base business at `483 at 2.2x CY2012E EV/Sales and attaching `95/share for Para IVs.
No comments:
Post a Comment