Comments
Shares of drug major Ranbaxy Laboratories on Thursday surged nearly 28 per cent, after several brokerages upgraded the company following its June quarter performance.
The stock closed at Rs 359.40 after surging to as high as Rs 377.70 during intra-day deals. Despite today’s sharp upswing, the stock is still down about 30 per cent year-to-date.
The company narrowed down its consolidated loss at Rs 524.24 crore for the second quarter ended June 30, on account of foreign exchange transactions and loss of goodwill in its European subsidiaries.
However, it clocked better-than-expected sales of Rs 770 crore in the key US market, where the company is currently facing stringent scrutiny from the drug regulator.
Analysts believe this as an indication of the company’s revived growth prospects in the US.
‘Key positive’
Nomura analysts Saion Mukherjee and Aditya Khemka said in a report, the US performance in the quarter was a “key positive”. In their report, which raised the target price to Rs 490 on the Ranbaxy stock, they said: “We believe a large part of the increase is on account of higher Absorica sales in the quarter. The market share of Absorica has ramped up over the weeks and is currently at 15.3 per cent.”
UBS, Edelweiss Securities Ltd, Kotak Securities, Anand Rathi and Antique Stock Broking and a few others have raised their recommendation on the stock citing improving sales outlook at its North America operations, where the company has been struggling with charges over the safety of its drugs.
Anand Rathi expects improved base business margins in CY14 and CY15, led by a ramp up in US revenue with high-margin products, recovery in domestic formulations and reduction in remediation costs pertaining to the consent decree.
“There are initial signs of turnaround with improving sustainability in US earnings,” Krishna Prasad, an analyst at Kotak Securities, said in a report on Thursday, raising his recommendation to buy from reduce.
“We believe Ranbaxy’s challenges remain, with weak performance in key branded markets, rebuilding the pipeline in the US, limited cash generation due to hedge losses and resolution of outstanding regulatory issues,” he cautioned and added that though “we also believe timelines on approvals/ resolution are unpredictable, the stock correction offers favourable risk-reward, driving our upgrade.”
> badrinaraynan.ks@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.