Reduce Ranbaxy Laboratories; target Rs 417: P Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's report on Ranbaxy Laboratories

"Ranbaxy Laboratories received 483 observations on Saturday (11th Jan, 2014) post US FDA’s inspection last week. While the gravity of the issues identified in the observations is yet to be publicly available, the 483 observations of the plant increases risk in FTFs and US core business. Currently, Ranbaxy’s quarterly revenues from US are USD 125-130m."

"We believe that prospect of key para-IV drugs including FTF opportunities in Diovan, Nexium and Valcyte to be strongly impacted. In case 483 observations lead to Import alert for Toansa plant, Ranbaxy would be scouting for alternative source of APIs to maintain FTF status and continuation of production of core generics. This would lead to squandering away low production cost benefits in Indian API plant. With 8-9 percent consolidated operating margin currently, we expect Ranbaxy may incur operating loss in case Import alert raises in Toansa plant."

"While we reach at our target price of Rs 530 following SOTP valuation methodology, it includes INR80 EPS from FTF opportunities. Also, the benefits from FTF cash flow to ease off leverage and expansion of Absorica, Ximino and other core products are included in valuation estimates. In case import alert raises in Toansa, we estimate INR113 value-at risk which may reduce target price to Rs 417," says Prabhudas Lilladher research report.

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