Ranbaxy jumps 30%; street cheers US base business growth
Analysts say the company's 26 percent sequential growth in US business was a big positive, and a stock re-rating was on the cards following the improvement visible in its base business.
August 09, 2013 / 14:55 IST
Moneycontrol Bureau
Shares of pharma major Ranbaxy Laboratories accelerated over 30 percent on Thursday after its good performance in the US market cheered nervous investors. There had been concerns earlier that the company's US business could take a hit after it pleaded guilty to felony charges related to manufacturing practises at its two plants at Paonta Sahib and Dewas in India.That apart, the company's relatively lower valuations compared to its peers, also helped in giving the stock a boost."Ranbaxy's US formulations business posted sales decline of 46 percent year-on-year due to Lipitor exclusivity that ended in May 2012. However, company posted a remarkable growth of 26 percent sequentially despite one month of Actos exclusivity in Q1. The entire sales of USD 138 million can be attributed to its base business as the company did not have any exclusivity during the quarter," said Hitesh Mahida of Fortune Equity Brokers.Overall, Ranbaxy reported a second quarter net loss of Rs 524 crore, in-line with analysts expectations, on the back of forex loss and goodwill impairment.Revenue of the company, owned by Japan's Daiichi Sankyo, declined 18 percent to Rs 2,683 crore in April-June.It must be noted Ranbaxy's revenue in the year-ago quarter was boosted by sales of its generic version of cholesterol lowering drug Lipitor."Ranbaxy's Q2 results were better than expected at the operating level, with 10% plus revenue growth (excluding exclusivities), better EBITDA margin and strong QoQ growth in US generics being the key encouraging signs," said a foreign brokerage.Edelweiss put a "buy" rating on Ranbaxy, versus earlier "under review" and Antique Stock Broking too upgraded the stock to "buy." Edelweiss said, the revision in rating was due to improved visibility and Antique added that there was "notable improvement" in base business performance."Q2 witnessed strong improvement in the core margins at 9.8 percent (from 7.6 percent QoQ). The management expects to scale up margins in coming quarters led by market share gains on Isotretinoin, Africa, India business recovery and strengthening manufacturing processes," said SBI Cap Securities.Ranbaxy shares finally closed at Rs 359.20 on NSE on Thursday, up near 28 percent.As of Thursday's close, the stock had declined 36 percent so far this financial year."We believe that the improvement visible in its base business is indicative of a better tidings and a stock re-rating is on the cards," said Mahida of Fortune Equity Brokers, maintaining a "buy" on the stock.SBI Caps also believes the recent correction in the stock as a good buying opportunity with limited risk. Nachiket Kelkar
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