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Date: February 9, 2010Search
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Ranbaxy Laboratories Limited

October 16, 2001

Encouraging exports

INTRODUCTION

Ranbaxy Laboratories (RLL) has reported 16% growth in sales and 68% jump in net profit for the 3Q01.RLL could achieve this due to 24% spurt in exports. The company has launched once-a day formulations of Ciprofloxacin and Ofloxacin, based on its in-house NDDS. RLL has entered into co-marketing arrangement with Cipla, Glaxo SmithKline and Cadila Healthcare for these products. The company is likely to receive approval from US FDA for its generic Cefuroxime Axetil. All these will translate into better performance for CY01. More in the report.

** Inside The Report **

 Valuations

Financials

QUARTERLY PERFORMANCE FOR 3Q01:

  • Sales were up by 16%. Domestic sales were higher by 9% whereas exports jumped by 24.3%.
  • Total expenses dropped from 85.6% to 85.3% of sales.
  • Operating margins were up from 14.4% to 14.7%.
  • Other income was up by 23.3% from Rs. 12.9 Cr. to Rs. 15.9 Cr.
  • EBIDTA margins improved from 17.2% to 17.7%.
  • Interest was up by 163% from Rs. 8.2 Cr. to Rs. 21.6 Cr. Depreciation increased by 4% from Rs. 12.5 Cr. to Rs. 13.0 Cr.
  • Profit before tax was up by 2.5% from Rs. 59.0 Cr. to Rs. 60.5 Cr.
  • Tax provision jumped by 139% from Rs. 5.9 Cr. to Rs. 14.1 Cr.
  • Extraordinary items were: Profit from the sale of Eli Lilly JV stake Rs. 72.7 Cr. and provision for Vidyut Investments losses for the market operations Rs. 30.0 Cr.
  • Net profit jumped by 68% from Rs. 53.1 Cr. to Rs. 89.1 Cr.

Improved exports performance

RLL has achieved 24% growth in exports from Rs. 211.1 Cr. to Rs. 262.5 Cr. The exports of formulations jumped by 56%, aided by a 57% rise in the US exports and a 20% rise in European exports. We expect strong export performance due to the launch of Advil tablets in the US markets, through its subsidiary Ohm laboratories. Ohm Laboratories has 180 days marketing exclusivity for this product.

Domestic launch of NDDS formulations

RLL has successfully launched Ciprofloxacin once- a day (OD) and Ofloxacin OD formulations based on its own NDDS in the domestic market. The company has entered into co-marketing arrangement with Cipla, Glaxo SmithKline and Cadila Healthcare for these formulations. We expect the company to achieve good market share due to the better patient compliance of these products.

Cefuroxime Axetil

RLL is in the process of receiving US FDA approval for its crystalline version of Cefuroxime Axetil in the US market. The delay in the launch is due to the litigation process initiated by the patent holder Glaxo SmithKline in the US courts.

Licensing of NCE

RLL has developed a NCE for the treatment of BPH, which is currently undergoing Phase II clinical trials. The company is planning to license this molecule to a reputed MNC. In such a case, RLL will receive milestone payments.

CONCERNS

Domestic performance not impressive

RLL has reported 9% growth in sales during the 3Q01 in the domestic market as compared to 7.5% market growth. The domestic performance has been affected by the general slowdown in the industry coupled with RLL’s huge exposure to the low margin anti-infective business.

Margins under pressure

In spite of the 24% rise in exports during the quarter, the operating margins have not shown any major improvements. The operating margins went up from 14.4% to 14.7% despite a strong export performance.

Vidyut Investments losses

RLL has provided Rs. 9.5 Cr. in the CY00 and Rs. 30.0 Cr. in the 3Q01 for the losses from Vidyut Investments stock market operations. However, since the exact figure is unknown, the company will have to provide for the balance of losses in the 4Q01.

Financials

PARTICULARS

QUARTER ENDED

%

YEAR ENDED

(In Rs. Crores)

SEPT

SEPT

CHANGE

DECEMBER

2001

2000

2000

Net Sales

538.3

464.1

16.0%

1745.9

Domestic

275.8

253.0

9.0%

934.7

% of net sales

51.2%

54.5%

-6.0%

53.5%

Exports

262.5

211.1

24.3%

811.2

% of net sales

48.8%

45.5%

7.2%

46.5%

Total expenses

459.1

397.3

15.6%

1559.7

as % of Net Sales

85.3%

85.6%

-0.3%

89.3%

Raw & Packing Materials

252.5

208.1

21.3%

876.2

as % of Net Sales

46.9%

44.8%

2.1%

50.2%

(Increase)/Decrease in stock

5.5

14.0

-61%

-7.5

as % of Net Sales

1.0%

3.0%

-2.0%

-0.4%

Personnel Expenses

38.2

31.8

20.1%

116.1

as % of Net Sales

7.1%

6.9%

0.2%

6.6%

R & D expenses

17.2

14.6

17.8%

51.0

as % of Net Sales

3.2%

3.1%

0.0%

2.9%

Other Expenses

145.7

128.8

13.1%

523.9

as % of Net Sales

27.1%

27.8%

-0.7%

30.0%

Operating Profit

79.2

66.8

18.6%

186.2

as % of Net Sales

14.7%

14.4%

0.3%

10.7%

Other Income

15.9

12.9

23.3%

49.9

EBIDTA

95.1

79.7

19.3%

236.1

as % of Net Sales

17.7%

17.2%

0.5%

13.5%

Interest

21.6

8.2

163.4%

-8.6

Depreciation

13.0

12.5

4.0%

50.2

PBT

60.5

59.0

2.5%

194.5

Provision for Taxation

14.1

5.9

139.0%

12.1

as % of PBT

23.3%

10.0%

13.3%

6%

PAT before extraordinary items

46.4

53.1

-12.6%

182.4

Extraordinary income

72.7

0.0

NA

0.0

Provisions & Contingencies

30.0

0.0

NA

0.0

PAT after extraordinary items

89.1

53.1

67.8%

182.4

Equity Capital

115.9

115.9

0.0%

115.9

EPS Rs. (annualised)

16.0

18.3

-12.6%

15.7

RLL has reported 16% increase in sales for 3Q01 from Rs. 464.1 Cr. to Rs. 538.3 Cr. The domestic sales were up by 9% from Rs. 253.0 Cr. to Rs. 275.8 Cr. Export sales jumped by 24.3% from Rs. 211.1 Cr. to Rs. 262.5 Cr. Total expenses declined from 85.6% to 85.3% of sales with 30 basis points improvement. The material cost along with stock adjustments increased marginally from 47.8% to 47.9% of sales. R & D expenses were also marginally up from 3.1% to 3.2% of sales. Personnel expenses went up from 6.9% to 7.1% of sales. Other expenses declined from 27.8% to 27.1% of sales with a reduction of 70 basis points. Operating profit went up from 14.4% to 14.7%. Other income was higher by 23.3% from Rs. 12.9 Cr. to Rs.15.9 Cr. EBIDTA margins improved from 17.2% to 17.5%.

Interest jumped by 163% from Rs. 8.2 Cr. to Rs. 21.6 Cr. Depreciation was higher by 4% from 12.5 Cr. to Rs. 13.0 Cr. Profit before tax went up by 2.5% from Rs. 59.0 Cr. to Rs. 60.5 Cr. Tax provision jumped by 139% from Rs. 5.9 Cr. to Rs. 14.1 Cr. due to the extraordinary income of Rs. 72.7 Cr. from the sale of stake in Eli Lilly. The company has provided Rs. 30.0 Cr. for the loss due to the Vidyut Investments operations. Net profit after extraordinary items jumped by 67.8% from Rs. 53.1 Cr. to Rs. 89.1 Cr.

Valuations

The current market price of Rs. 654 discounts the annualized EPS for CY01 of Rs. 14.9 by 43.9X. The upward trigger in share price is expected on the future developments on the export front.

Company

Sales

EPS

Price as on

Market

P/E

Market

PEG

11th Oct 01

Cap

cap/sales

Cadila Healthcare*

509

11.0

106

632

9.6

1.24

0.22

Cipla

1048

29.9

1025

6150

34.3

5.87

0.93

Dr. Reddy's Labs*

899

21.3

932

7120

43.8

7.92

0.55

Ranbaxy Labs

1746

15.7

654

7580

41.7

4.34

6.94

Sun Pharma

613

28.9

550

2574

19.0

4.20

0.49

E Merck

313

23.2

248

419

10.7

1.34

0.26

Parke Davis

212

15.7

130

157

8.3

0.74

0.52

Pfizer

327

16.7

397

929

23.8

2.84

1.13

Rs. 5/- paid up

RLL has the highest market capitalization when compared with its peers. The company has lower P/E than Dr. Reddy’s Labs (DRL). RLL ranks lower market cap /sales ratio than Cipla and DRL.

RLL’s future valuations will be driven by its research success and continued success in exports.

 

Medium term investors should accumulate

For further clarifications/ suggestions please contact-

KRC Research É 91-22-830 4923

Ê 91-22-820 5311

KRC Sales É 91-22-233 8050

Ê 91-22-265 4372

* krc@vsnl.com

Disclaimer:

This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, investors are advised to satisfy themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt. Ltd., does not bear any responsibility for the authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same.

 

Further, KRC Research Reports only provide information updates and analysis. All opinion for buying and selling are available to investors when they are registered clients of KRC Investment Advisory Services. As a matter of practice, KRC refrains from publishing any individual names with its reports.

As per SEBI requirements it is stated that, Kisan Ratilal Choksey Shares & Sec Pvt. Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale thereof while this report is in circulation.

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