Sep 27, 2011, 04.20 PM | Source: Moneycontrol.com
PINC Research has come out with its report on pharma space. According to the research firm one can buy Lupin and Glenmark Pharma.
Rupee depreciates; Q2FY12 could be marred by MTM losses: With rupee depreciating by ~10% against the USD in last one quarter we analyse the impact of the same on the Pharma sector which derives nearly 50% of its revenue from the export segment.
The key highlights are as follows:
DRL and Lupin to be partially benefited: DRL has covered 50-55% of its exports through debt and forward/option contracts. As a result the company could increase its hedges during the quarter. However, there could be MTM losses on foreign currency denominated short term borrowings during the quarter. On the other hand, Lupin has hedged its 65-70% of the export revenues through working capital debt and forward contracts. Subsequently, we expect interest cost to increase for the company.
Ranbaxy to have negative impact: Ranbaxy could be the worst impacted in our coverage universe due to rupee depreciation given the high level of hedges of USD750mn and foreign currency debt to the tune of USD400mn on
Outlook and Valuation: We continue to maintain our Neutral stand on the sector given the rich valuations and the increasing competition in the high-margin domestic formulations business.
Our Buys: Lupin and Glenmark; Sells: Dr Reddy’s and Glaxo Pharma.
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To read the full report click here
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