Analysts advise how to trade Ranbaxy, say EBITDA may fall

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Shares of Ranbaxy are reeling (skid 20 percent intraday) under pressure on US Food and Drug Administration (USFDA) ban for its Punjab-based Toansa Active Pharmaceutical Ingredients (API) plant. Most analysts are negative on the stock, saying it is almost like the worst case scenario playing out. 

Toansa is the fourth unit of the company which is banned and added to consent decree. With this, all of the company's India-based plants supplying to US are banned. Its Ohm Laboratories, the only plant which has USFDA approval, manufactures drugs using API from Toansa.

Toansa is the only API plant for Ranbaxy and the move will delay future approvals. The setback will impact base business in the US denting margins and key first-to-file (FTF)opportunities in jeopardy. Launch of FTF drugs give exclusive rights to market drugs in the US for a fixed period with limited competition.

So, is it best to avoid or sell it now?

Most analysts are bearish on the stock and suggest avoiding it. Deven Choksey, MD at KR Choksey Shares & Securities says Ranbaxy Laboratories is on avoid list. "I think better opportunities are available within the pharmaceutical space, so concentrate on that. We have been maintaining our view point that it is an avoid for some time," he added.

Arvind Bothra, VP of Religare Enterprises feels that one should buy the stock only at a level below Rs 300.

Macquarie has downgraded the stock to neutral and reduced target price to Rs 450 from Rs 500.

Surajit Pal, Pharma Analyst at Prabhudas Lilladher advises to buy the stock in Rs 200-250 per share range for long-term while Chirag Talati, Pharma Analyst at Espirito Santo Securities suggests to avoid it. He feels that Diovon launch may benefit the company, if the FDA agrees for somebody else to manufacture API, but Ranbaxy’s overall ability to get in control of its quality issues is under scanner.

Ajay Srivastava of Dimensions Consulting is bullish on the stock considering its domestic business. With a buy rating, he thinks at the point of time of a valuation of Rs 14,000 crore one would tend to believe that it is on the positive side of the cycle, not on the negative side. “It has got a very strong domestic franchise, very profitable franchise. If you really cut out the international operations the domestic side is very, very profitable and the local brands are highly profitable and growing very well," he added.

Negative EBTIDA

Pal feels the ban on API may result in the company reporting negative EBITDA. Both Bothra and Bino Pathiparampil, VP Research, Institutional Equities, IIFL agree that its EBITDA will be impacted negatively as contribution from the US will slowdown drastically.

Anmol Ganjoo, JM financial also does not see any major uptick from Ranbaxy earnings in near-term and points out that it is only Indian pharmaceutical company to have four import alerts.

Botha is concerned that outsourcing cost may go up but at least would help cover the fixed cost at the Ohm Labs facility which has recently expanded operations. So to keep that plant running you need a definitive source of APIs just to cover the fixed cost.

“I see more downside here because US contributes 40 percent of revenues for Ranbaxy and proportionately higher EBITDA and almost 80 percent of it gets affected due to this ban on Toansa,” he adds. He warns that the company may see subdued level of profitability for the company in next four-six quarters and more importantly many hopes are resting on their exclusivities.

Bothra even goes on to say that Ranbaxy may even report 2-3 percent EBITDA margin in the coming quarter.