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IDFC
Ranbaxy (Ourperformer)
CMP: ₹708
Target: ₹787
Consolidated revenues declined by 20 per cent q-o-q and 10 per cent y-o-y to ₹2,620 crore (estimates, ₹3,200 crore) due to lower US sales ($136 m, versus estimate of $225 m). We believe it is largely due to sharply lower Diovan exclusivity sales in the quarter. Also, the India business also grew by just 2 per cent y-o-y. Ebitda (adjusted for forex) was down by 6 per cent y-o-y to ₹250 crore (estimates ₹860 crore), on account of lower exclusivity income. Ranbaxy made a tax provision of ₹8.2bn as it provided for MAT tax credit after an FDA decision to cancel the FTF status of Nexium. Net forex loss was ₹220 crore. The company reported a loss of ₹1,030 crore, which is sharply lower than our estimate. Key positives: Q-o-q reduction in SG&A cost. Key negatives: Weak revenue across geographies, forex loss, higher tax provision.
According to the proposed scheme of arrangement in the Ranbaxy-Sun merger, Ranbaxy shareholders will get 0.8x shares of Sun for every share of Ranbaxy. So, assuming successful closure of the merger, Ranbaxy’s share price would broadly track Sun’s till the merger is completed.
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