Why SBICap remains bullish on Ranbaxy despite weak Q1 nos

Moneycontrol Bureau

SBI Cap Securities' Vivek Kumar continues to be bullish on Ranbaxy Laboratories despite its poor first quarter earnings; as against other brokerage houses like Quant Capital and Angel Broking which are advising to stay away from the stock.
Kumar said that the brokerage will continue to retain buy rating on the stock, with Rs 476 as the target price. Update on consent decree with US Food and Drug Administration, potential monetization of generic version of anti- hypertension drug Diovan, growth in market share of dermatology drug Absorica are the three key businesses which are likely to drive company’s sale in 2013, Kumar said. Pharma major today reported lower-than-expected Rs 126 crore consolidated net profit for the first quarter, down 90 percent year-on-year due to high base effect. The company's earnings in the year-ago quarter were boosted by the launch of its generic version of cholesterol lowering drug Lipitor.
Net sales of the company, were also down 34 percent in Jan-March to Rs 2,439.8 crore.
Unlike SBICap, Quant Capital is skeptical about Ranbaxy’s growth prospective in the current year. “The stock is seriously missing triggers. The biggest play for this company over the last year was exclusivity (for Atorvastatin), now that has strayed out and many of the Para 4 (filing) have been delayed and not coming through,” Shardul Pradhan of Quant Capital said.
He further said that uncertainties on products approvals and regulatory hurdles keep resurfacing for the company, which could also be an overhang for the stock.
Sarabjit Kour Nangra of Angel Broking also holds negative view on the stock. “Unless the company’s operating performance improves and stabilises at a profitable level I think the overhang on the stock will continue to remain there,” she said.
Nangra sees 15-20 percent of earning fall in 2013. Pradhan is expecting earnings per share of Rs 30 in cuurent year with a target price of Rs 442.