Reduce Ranbaxy Laboratories; target Rs 355: PINC Research

40081 Investors following Ranbaxy Labs. Share this News with them.

0

Like this story, share it with millions of investors on M3

Reduce Ranbaxy Laboratories; target Rs 355: PINC Research

PINC Research is bearish on Ranbaxy Laboratories and has recommended reduce rating on the stock with a target price of Rs 355 in its December 21, 2011 research report.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Buy Havells India; target Rs 519: Firstcall Research Want your portfolio to outperform in 2012?Buy these 10 stks Buy Mahindra & Mahindra; target Rs 920: Emkay ALSO READ See previous views by PINC Research See what other Experts & Brokerages are saying about Ranbaxy Labs See messages about Ranbaxy Labs Ranbaxy Labs BSE | NSE 01/06/12 Are Mutual Funds betting on Ranbaxy Labs?

PINC Research is bearish on Ranbaxy Laboratories and has recommended reduce rating on the stock with a target price of Rs 355 in its December 21, 2011 research report.

"Ranbaxy Laboratories has signed a consent decree with the USFDA committing to strengthen its procedures and policies as well as to comply with cGMP. The company has also indicated that it intends to make a provision of USD500mn with regards to investigation by the U.S. DOJ. Although this is an important step towards the long awaited USFDA and DOJ issue resolution and would be sentimental positive for the stock. However, the company has not provided any clarity on the terms of the consent decree and would make it public in the next few weeks. We are estimating launches of products from Indian facilities from H2CY12. Further, the amount of penalty is higher than estimated and would negate the expected cash flow of USD450mn from FTF opportunities in CY12."

"Ranbaxy has signed a consent decree with the USFDA committing to strengthen its procedures and policies as well as to comply with cGMP. It would now require the approval by the US District Court for the District of Maryland. As a result, Ranbaxy has not made public the terms of consent decree including the pending approval of Dewas and Paonta Sahib facilities. Further, the clarity is likely to emerge in the next few weeks. However, we expect launching of products from Indian facilities would still take some more time as consent decree normally involves implementation of remediation measures and re-validation of the same by the regulator. The company has also indicated the intend to make a provision of USD500mn with regards to the investigation by the U.S. DOJ. The company has adequate resources to fund the penalty and does not plan to raise any debt for the same. Further, Ranbaxy does not expect any additional penalty over and above USD500mn. However, the amount is higher than estimated (USD250mn) and would negate the expected cash flow of USD450mn from the FTF opportunities in CY12."

"Pending clarity on the terms of the consent decree we are not changing our estimates pertaining to our base business. We are estimating launches of products from Indian facilities from H2CY12. The stock is currently trading at 23.2x and 16.1x its CY12E and CY13E recurring earnings respectively. We maintain 'Reduce' rating on the stock and value the core business at Rs 329/share (22x one year forward recurring earnings), FTF pipeline at Rs 81/share and reduce Rs 55/share for the penalty provision resulting in revised SOTP based target price of Rs 355," says PINC Research report.

Public holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment