Financial Daily from THE HINDU group of publications
Sunday, Oct 24, 2004
Financial Daily from THE HINDU group of publications Sunday, Oct 24, 2004 |
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Investment World
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Stocks Markets - Recommendation Ranbaxy Laboratories: Hold Nath Balakrishnan
Financial performance
For the quarter ended September 2004, the topline of the consolidated entity rose 19 per cent to Rs 1,327 crore (on a year-on-year basis); there was a similar growth at the operating profit level, at Rs 312 crore. There has been an increase in operating margin at 21 per cent for the latest quarter compared to 16 per cent in the corresponding previous period. Other operating income at Rs 34 crore has dropped considerably from the Rs 84 crore in the corresponding previous period. This is because of a fall in forex gains to Rs 3 crore (Rs 24 crore) and export benefits to Rs 19 crore (Rs 60 crore). The royalty income from Bayer for this quarter is $1.5 million (about Rs 7 crore), which is expected to sustain in the coming quarter as well. Subsequent to the incidence of tax (which has been lower by about 200 basis points on a year-on-year basis), earnings at Rs 200 crore were up seven per cent; growth in earnings was 13 per cent higher if the exceptional item incurred in the same quarter of the previous year is adjusted.
Business highlights
A key feature in the latest quarter has been the 13 per cent year-on-year growth in the US market operations. A year-on-year quarterly comparison becomes more appropriate as sales of the generic Ceftin had started tapering off with the entry of a number of players in the previous period. The high base effect of Ceftin had tended to skew the performance in the first half of this fiscal. Moreover, Ranbaxy got listings in over 80 US chain stores, which is equal to the number of listings it managed in the first two quarters of the calendar year; this is a positive development and should help the company gain incremental marketshare for both its current as and to-be-launched products. Ranbaxy intends to file 20-24 Abbreviated New Drug Applications (ANDAs) in the current calendar; seven have been filed to date. The company has stated that its ANDA filings are usually back-ended and happen towards the end of the financial year. Should the remaining take place over the next quarter, there would also be a concomitant increase in costs associated with such an exercise, which may moderate margins. To an extent, any such moderation could be offset, at least partially, by an increase in demand for antibiotics in the US (a segment in which Ranbaxy has a significant presence) on account of seasonality effects as well a depreciating rupee. Of the total 127 ANDA filings, 92 have been approved by the US Food and Drug Administration, with the remainder pending approval. Ranbaxy's branded generics business achieved revenues of $40 million (about Rs 184 crore) in the year-to-date, led by Sotret (other brands such as Riomet and Dispermox make up this basket); the company is expected to end the year with revenues of about $52 million (about Rs 240 crore). We view the momentum in this business as a sitive and expect benefits to flow into Ranbaxy over the long term. Europe is another geography that has emerged as another engine of growth; Ranbaxy has seen a strong performance, aided by the contribution of RPG Aventis in France (which Ranbaxy acquired). Likewise, opportunities also exist in the other markets such as the UK and Germany, though intense price competition with multiple players entering the fray can keep profitability under check.
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