Prabhudas Lilladher is bullish on Ranbaxy Labs and has recommended accumulate rating on the stock with a target of Rs 579 in its November 26, 2012 research report.
“Ranbaxy’s launch of Absorica (Isotretinoin) in the US is a key event as we believe that the product will become the largest selling product for the company in the US latest by 2014 (excl. FTF products). The company has licensed this product from Cipher, a Canadian company. Absorica is indicated for the treatment of severe recalcitrant nodular acne in patients who are 12 years of age and older.”
“Apart from FTF launches, Absorica is a major product launch since the company’s US business was impacted by USFDA ‘Import Alert’ in 2008. Before the USFDA issues cropped up at Ranbaxy, Isotretinoin was the largest selling product for the company, with annual revenue of ~US$100m in 2007. However, the company had to discontinue the product due to import alert on Dewas and Paonta Sahib facilities in 2008. Apart from being the largest selling product, it was one of the most profitable one for the company due to limited competition and branded nature of the product. Despite Ranbaxy being out of this product market for the last four years, Isotretinoin remains a lucrative market with limited competition due to complexities involved in the development and manufacturing of the product. Currently, there are only three generic companies selling Isotretinoin in US viz. Teva, Mylan and Douglas Pharma, with Teva holding majority market share. The total market size of the product is ~US$400m. Now with the entry of Ranbaxy, it becomes a four-player market.”
“Resolution of USFDA issues remains a key for the company to improve its revenues in US and overall profitability. However, large hedges on the books and uncertainty related to monetization of FTF pipeline are likely to remain an overhang on the stock in the medium term. Though the company is showing improvement in core margins, the improvement should be sustainable to regain investor confidence. At the current price, the stock trades at 26.5x CY12 and 22.8x CY13 (adjusted for DCF value of FTF at Rs77/share). We maintain ‘Accumulate’, with target price of Rs579,” says Prabhudas Lilladher research report.
FIIs holding more than 30% in Indian cos
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