Angel Broking neutral on Ranbaxy Laboratories

Angel Broking`s research report on Ranbaxy Laboratories“For 1QFY2015, Ranbaxy Laboratories (Ranbaxy) posted a lower-than-expected set of results. For the period, sales came in at Rs2,372cr V/s Rs2,633cr in 2QFY2014, ie a yoy de-growth of 9.9%. On the operating front, the company posted an OPM of 7.8% V/s 6.3% in 2QFY2014, which aided the adj. net profit to come in at Rs63cr (Rs120cr in 2QFY2014). However, on account of the Rs237cr amount paid towards a settlement of charges in the US relating to its Indian manufacturing units, the company posted a net loss of Rs185.9cr (V/s a net loss of Rs524.2cr during the corresponding period of last year). We remain neutral on the stock.” “For the quarter, sales came in at Rs2,372cr, V/s Rs2,633cr in the corresponding quarter of the previous year, a yoy de-growth of 9.9%. The sales growth was impacted on account of the voluntary withdrawal of API sales from the Dewas and Tonasa facilities, which led the API and other sales from the two facilities to de-grow by 81% yoy. Sales from Asia Pacific and Latin America also dipped, ie by 26% yoy. The Africa region also posted a de-growth of 26% yoy. Among the key markets, the US posted a de-growth of 11% yoy during the quarter. India on the other hand posted a 12% yoy growth during the period. On the operating front, the company posted an OPM of 7.8% V/s 6.3% during the corresponding period of last year, which aided the adj. net profit to come in at Rs63cr (V/s Rs120cr in 2QFY2014. However, on account of the Rs237cr amount paid towards a settlement of charges in the US relating to its Indian manufacturing units, the company posted a net loss of Rs185.9cr (V/s a net loss of Rs524.2cr during the corresponding period of last year).” “The company has a major portion of its facilities under the USFDA import alert and any major recovery in sales and profitability will likely take time. While the company has been trading at a discount to its peers, but after the announcement of its merger with Sun Pharma, we believe the stock will mirror the movement in Sun Pharma’s stock. As regards shareholders of Ranbaxy, we believe that they would benefit from their investments, given the synergies and the positives emanating from the deal. We recommend a Neutral rating on the stock as it has already seen a good run-up in the recent period," says Angel Broking research report.

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