Angel Broking neutral on Ranbaxy Laboratories

"Ranbaxy Laboratories (Ranbaxy) reported a lower than expected performance in its 4QCY2012 results. While the company’s top-line de-grew 28.8% during the quarter, the OPM came much below expectation at 3.2% (vs an expected 9.3%). The adjusted net loss came in at Rs 25cr. The operating performance of the company continues to be impacted and there is no clarity on the consent decree. While the valuations have become attractive on EV/sales basis, we would wait for a few more quarters before we review the stock.

Lower-than-expected performance: Ranbaxy reported net sales of Rs 2,671cr, down 28.8% yoy, and above our estimate of Rs 2,525cr. The gross margin declined by 15.3% to 56.8%, which along with a lower rise in staff expenditure, led the OPM to come at 3.2%, much lower than 21.7% in 4QCY2011. This was lower than our expectation of 9.3%. This led to the company posting an adjusted net loss of Rs 25cr.

Outlook and valuation: The stock is trading at attractive valuations of EV/sales of 1.2x CY2014E. While the valuation is very attractive in comparison to its peers, given the low profitability in the core business and uncertainty on the USFDA front, we maintain our Neutral rating on the stock," says Angel Broking research report.

Institutional holding more than 40% in Indian cos

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