Ranbaxy Labs Q1: MOST expects PAT to dip 39% at Rs 105.5 cr

Motilal Oswal has come out with its first quarter (April-June) earnings estimates for the pharmaceutical sector. The brokerage house expects Ranbaxy Laboratories to report a 16.7 percent growth quarter-on-quarter (decline of 38.8 percent year-on-year) in net profit at Rs 105.5 crore.

Revenues are expected to increase by 10.5 percent Q-o-Q (up 15.5 percent Y-o-Y) to Rs 2,662.2 crore, according to Motilal Oswal. Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to rise by 44.6 percent Q-o-Q (up 2.1 percent Y-o-Y) to Rs 253.1 crore. Motilal Oswal on Ranbaxy Laboratories We expect Ranbaxy Laboratories (RBXY) to post 16 percent Y-o-Y growth in core top line for 2QCY13E at INR 26.62 billion, driven by strong 20 percent growth in core US base sales over a low base of 2QCY12. Core EBITDA is expected to grow just 2 percent Y-o-Y to INR 2.53 billion, mainly due to deteriorating profitability in the base business and higher R&D and other expenses. Core EBITDA margin would shrink by 130bp Y-o-Y to 9.5 percent. We expect adjusted PAT to decline 38 percent Y-o-Y to INR 1.05 billion, led by subdued operational performance, higher depreciation and taxes. Ranbaxy had reported a forex loss of INR 3.67 billion above EBITDA in 2QCY12 against which we expect a forex loss of INR 1.84 billion for this quarter. There was also a forex loss of INR 6 billion in extraordinary expenses, against which we expect a loss of INR 4.75 billion this quarter. We believe the outlook for Ranbaxy remains challenging as quality/compliance issues have impacted its operations and will weigh on investor confidence. It is imperative for the company to improve core business margins as one-offs have started waning off. Stock trades at 19.6x FY14E and 14.3x FY15E EPS.