Ranbaxy Laboratories Limited

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.

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.

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.

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.

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.

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.

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.

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.

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.

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