Accumulate Ranbaxy; target Rs 780: KRChoksey

KRChoksey's report on Ranbaxy Laboratories

"Ranbaxy’s total income degrew by 9.5% YoY to Rs. 2619 crs impacted by global currency depreciation in some markets & slowdown in US markets during the quarter. API sales faced supply challenges from Dewas & Taonsa facilities. However, India, APAC & LATAM performed well during the quarter. Branded & OTC category contributed around 57% of total sales. EBIDTA degrew by 58% YoY to Rs. 113 crs & EBITDA margins stood at 4.3% during the quarter on account of lower sales, lower gross margins & forex loss of Rs132.7crs. Excluding forex, adjusted operating margins are around 9.4%. Company has provided for carrying amount of an asset representing MAT credit of Rs. 822.7 crs. Company posted reported loss of Rs. 1030 crs during the quarter."

"Going ahead we believe base business sales will improve on back of recovery in domestic market & other international markets once the currency headwinds stabilizes. We believe clearance of any facility by USFDA will provide potential upside to our target price. We believe stock is expected to follow the movement of Sun Pharma. We maintain ACCUMULATE rating & value the stock at Rs 780 based on 0.8x Sun Pharma’s target price of Rs 976 (24x FY17EPS)", says KRChoksey research report.

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