Ranbaxy: American dreams

High-volume drug launches key to Ranbaxy success

The improvement in Ranbaxy's financials, which began since the beginning of 2006, continued in the December 2006 quarter, helped by sales of simvastatin and amoxicillin in the US and better performance in the CIS countries thanks to its Terapia acquisition.

Consolidated operating profit improved by 216 per cent y-o-y on a revenue growth of 22.7 per cent.

Operating profit margin was up 917 basis points y-o-y to 15 per cent. Sales in North America grew 20 per cent y-o-y in the quarter, while BRIC markets recorded 45 per cent growth.

However, the stock price declined 3.7 per cent on Friday as analysts expect a waiting period till the next triggers come in place. The exclusivity of 80 mg simvastatin in the US ended in December, and the price of the drug has fallen over 95 per cent.

Growth in the US has dipped in the second half of CY06, and will improve if the company launches high volume drugs. Analysts expect that the US FDA approval for its Paonta Sahib facilities will come through by May-June 2007.

Ranbaxy is planning to increase its branded formulations thrust going forward and increase product registrations.

Partnerships like the one it has with Ipca Labs, where it markets the latter's generic medications in the US, or the strategic stake in Krebs Biochemicals, will also help. At about 22 times estimated CY07 earnings and 19 times CY08 earnings, the upsides seem factored in.

NDTV: Weak signal

NDTV's revenues for the December quarter are quite disappointing with revenues up just under 16 per cent y-o-y at Rs 79 crore, a reflection of the growing competition in the English news genre.

With costs having risen by 22 per cent y-o-y, operating profit margin has fallen 360 basis points to 24.2 per cent, while operating profit has remained flat at Rs 19.1 crore.

The numbers may not seem encouraging, but NDTV is building new growth engines both in the news genre as also in the entertainment and lifestyle spaces, by leveraging its existing expertise in broadcasting as also its brand equity. It aims to be a complete media player with a global footprint and plans to extend its distribution tie-ups beyond the US, the UK and Canada.

With the arrival of conditional access and DTH, albeit selectively, NDTV will also benefit from higher subscription revenues. The company is also exploring internet and media processing outsourcing ventures.

The stock has seen a huge run-up in the last one month, gaining over 50 per cent. At the current price of Rs 311, the stock trades at highly expensive valuations of 62 times estimated FY07 EPS and 40 times FY08 EPS.

The company is undoubtedly building new businesses and still enjoys a good brand franchise. However, competition in the English and Hindi news genres is fierce with new entrants gaining viewer share and subscription revenues will take their time coming.