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Sell Ranbaxy, target of Rs 177: Reliance Money
Reliance Money has maintained its sell rating on Ranbaxy Laboratories with a target price of Rs 177. The forex fluctuation would continue to dent Ranbaxy’s performance through hedging loss and translation loss as well. The research firm estimate 1% fall in the Re/$ ratio would deteriorate Ranbaxy’s CY09E earnings by 5%.
Reliance Money has maintained its sell rating on Ranbaxy Laboratories with a target price of Rs 177 in its December 10, 2008 research report. "Government of India (GoI), in order to provide some relief to the indian companies (who have suffered huge forex losses owing to weakening Rupee vis-ŕ-vis US Dollar on the outstanding FCCBs in their books), has liberalised the scheme for Prepayment/ buyback of FCCB issues. With Ranbaxy not qualifying for availing the FCCB pre-redemption scheme, FCCB would certainly be there in the Ranbaxy's books till the conversion (due in 2012 at a revised price of Rs 550) unless converted earlier. On the other hand, Re/$ movement is completely uncertain looking at the global turmoil. Thus, the forex fluctuation would continue to dent Ranbaxy's performance through hedging loss and translation loss as well. We estimate 1% fall in the Re/$ ratio would deteriorate Ranbaxy's CY09E earnings by 5%."
"Thus, with no positive triggers in near term and looking at the remote possibility of FCCB pre-redemption and continuing forex loss due to currency fluctuation, we reiterate our SELL on Ranbaxy with a target price of Rs. 177 (which comprises of the base business value of Rs 107 per share i.e 10xCY09E EPS and First-To-File opportunities valued at Rs 70 per share)," says Reliance Money's research report.
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To read the full report click on the attachment......
