Ranbaxy laboratories

Current market price: Rs 272.40
Target Price: Rs 423
Upside: 55.29%
Brokerage: Kotak Securities

   
Ranbaxy Laboratories will focus on monetisation of Para-IV ANDAs with 18-20 first-to-file products with market size of around $26 billion valued at innovator prices. The settlement with Pfizer for Lipitor and Caduet has improved the revenue visibility in 2011 and 2012. It provides certainty regarding the timing of the entry of a generic version of Lipitor in US and other geographies.

Through this settlement, Ranbaxy is expected to make net profit of over $1 billion during the 180-days exclusivity period. The USFDA had issued two warning letters to Ranbaxy and an import alert for generic drugs produced at the company’s Dewas and Paonta Sahib plants in India. The FDA Import Alert covers more than 30 different generic drug products. The brokerage expects a 10 per cent de-growth in the US business in FY08 and FY09.

The management has reiterated that the deal with Daiichi Sankyo is binding, final and is progressing as per schedule. Emerging and developed markets constitute about 54 per cent and 39 per cent of global sales, respectively.

For FY09, the expected revenue growth is 7.1 per cent to Rs 8,020 crore and net profit growth is 52.1 per cent to Rs 960 crore. At Rs 309, the stock is trading at 23.9x FY08 and 15.7x FY09 earning estimates. The brokerage has reduced the price target to Rs.423 (from Rs.550 earlier).