Accumulate Ranbaxy Laboratories; target of Rs 513: Emkay

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Accumulate Ranbaxy Laboratories; target of Rs 513: Emkay

Emkay Global Financial Services is bullish on Ranbaxy Laboratories and has recommended accumulate rating on the stock with a target price of Rs 513 in its December 7, 2011 research report.

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Emkay Global Financial Services is bullish on Ranbaxy Laboratories and has recommended accumulate rating on the stock with a target price of Rs 513 in its December 7, 2011 research report.

"Ranbaxy Laboratories successfully launches generic Lipitor (30th Nov) and Authorized Generic Caduet (6th Dec) in US market. Lipitor - We expect Ranbaxy to garner US$500mn within the exclusivity period clocking an EPS of Rs 38. For Caduet - we expect sales of US$33mn during the exclusivity period and an EPS of Rs 1.3. With the launch of these 2 products, base US business is expected to increase by 50% to US$450mn and margins will expand 200bps in CY12E."

"Ranbaxy was FTF paraIV on 5/10, 20, 40mg and, 10/10, 20, 80 mg. Mylan was FTF Para IV on 2.5mg and 10/40mg and para IV on rest of the strengths. Mylan has already launched the drug on Nov 30th; however, Ranbaxy launched it on Dec 6th due to delay in approval from USFDA. We had assumed US$33m sales and EPS of Rs 1.31 during the exclusivity period with Price Erosion: 50% and Market Share: 35% Ranbaxy got the approval for 10, 20, 40, 80mg generic version of Lipitor to launch in US on 30th Nov. Lipitor will be launched from Ranbaxy's US based Ohm labs. Company has teamed-up with Teva to fight against Pfizer and Watson. We had assumed sales of US$500mn and EPS of Rs 38 per share during the exclusivity period assuming price erosion of 50% and market share of 40%. Recurring sale from Lipitor is estimated at US$100 mn annually with an EPS of Rs 5 post exclusivity."

"We expect Ranbaxy to report 21% base business revenue CAGR over CY10-12E. Base EBIDTA margins are expected to increase from 10.5% in CY10 to 12.3% in CY11E & 14.9% in CY12E. Base Earnings are expected to register 60% CAGR over CY10-12E to Rs 9.1bn clocking an EPS of Rs 21.5 in CY12E. We value the company at 20x CY12E base business EPS & NPV of P-IV opportunities at Rs 82 to arrive at a target price of Rs 513. Maintain accumulate. At CMP, the stock trades at 14x & 11x CY12/13E EPS," says Emkay Global Financial Services research report.

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