Ranbaxy slips further as Q4 results disappoint street

Ranbaxy shares tumbled 4 percent on Wednesday morning, extending Tuesday's losses on a surprise fourth quarter loss on the back of falling sales and costs related to the recall of its cholesterol lowering drug in the US market.
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Feb 27, 2013, 01.55 PM | Source: Moneycontrol.com

Ranbaxy slips further as Q4 results disappoint street

Ranbaxy shares tumbled 4 percent on Wednesday morning, extending Tuesday's losses on a surprise fourth quarter loss on the back of falling sales and costs related to the recall of its cholesterol lowering drug in the US market.

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Ranbaxy slips further as Q4 results disappoint street

Ranbaxy shares tumbled 4 percent on Wednesday morning, extending Tuesday's losses on a surprise fourth quarter loss on the back of falling sales and costs related to the recall of its cholesterol lowering drug in the US market.

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Moneycontrol Bureau

Ranbaxy shares tumbled 4 percent on Wednesday morning, extending Tuesday's losses on a surprise fourth quarter loss on the back of falling sales and costs related to the recall of its cholesterol lowering drug in the US market.

The pharma major on Tuesday reported a consolidated net loss of Rs 492 crore in Oct-Dec, net sales declined 29 percent year-on-year to Rs 2,671 crore.

The loss was lower than the Rs 2,983 crore loss it reported in the year ago quarter, but note that it had made a settlement related provision of Rs 2,648 crore back then.

Last quarter, the company owned by Japan's Daiichi Sankyo, had foreign exchange loss of about Rs 180 crore and it also set aside Rs 186 crore as costs related to the recall of select batches of Atorvastatin Calcium, its generic version of Pfizer's Lipitor, from the US market.

Sales were lower in Oct-Dec due to exclusive launch of its Atorvastatin drug in the year ago quarter and the drug recall this quarter.

Also Read: Ranbaxy restarts Atorvastatin production in the US

US revenue declined 64 percent  in dollar terms and India and emerging market growth also remained patchy, noted Hemant Bakhru of CLSA Asia Pacific Markets.

"Ranbaxy's Q4 numbers were weaker than anticipated as operating earnings got impacted due to unexpected non-recurring cost items," he said.

"Dec quarter was weaker than expected due to significant sequential margin decline from 13 percent in Sept quarter to just 8 percent," said analysts Anubhav Aggarwal and Chunky Shah of Credit Suisse.

The Credit Suisse analysts have a "neutral" rating on the stock and cut their margin forecast on Ranbaxy by 100 bps, since part of consent decree related higher expenses are expected to continue. They have also cut EPS (earnings per share) guidance for 2013 by 10 percent and for 2014 by 6 percent.

Meanwhile, CLSA's Bakhru, who has an "outperform" rating on the stock, expects operating margins to recover over coming quarters as the company resumes Atorvastatin shipments in the US and the gradual expansion of branded business.

Nomura Financial Advisory and Securities India cut its earnings estimates for Ranbaxy by 8 percent for 2013 and 12 percent for 2014. Price target has been reduced to Rs 415 from Rs 510.

"We maintain that Ranbaxy will realise upside from key exclusivities like Diovan and Valcyte. This is also reflected in management's 2013 revenue guidance of over Rs 120 billion (Rs 12,000 crore). In our view, the stock is not cheap, as it currently trades at 13 times 2014 expected base business EBITDA. With a lack of clarity on margins, we believe this is not the right time to invest despite relative underperformance since the Lipitor recall," Nomura analysts Saion Mukherjee and Aditya Khemka said, maintaining "neutral" on the stock.

At 10:20hrs, Ranbaxy was down 4.4 percent at Rs 398.30 on NSE. The stock has slumped more than 20 percent, since Ranbaxy announced the drug recall on Nov 23.

Nachiket Kelkar
nachiket.kelkar@network18online.com

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