Ranbaxy: Chill pill

Pravastatin sales and expansion in emerging markets will keep short-term growth going.

Like other industries depending on exports, Ranbaxy too was adversely affected by the rupee appreciation. Thus, even though its pharmaceutical sales grew 25 per cent in dollar terms, they were up just 12 per cent y-o-y in rupee terms during the last quarter.

It was the other operational income rising 233 per cent to Rs 74 crore, which propelled Ranbaxy's total operational income by 22.4 per cent to Rs 1582.1 crore.

Ranbaxy's other operational income includes export benefits, forex gains ""excluding those on foreign currency borrowings and revenues from Bayer on ciprofloxacin.

The launch of pravastatin 80 mg tablets in the US with 180-day marketing exclusivity in June 2007 and a good performance from the Romania-based Terapia, which it acquired earlier, helped sales. As a result, operating profit grew 34.1 per cent y-o-y to Rs 190.8 crore in the last quarter.

Nevertheless, operating profit margin grew 110 basis points to 12.1 per cent in Q2 CY07. Ranbaxy's sales in Europe grew 55 per cent y-o-y to $86 million (approximately Rs 344 crore) helped by strong sales in Romania and other east European markets. In addition, the company reported strong growth in western European markets such as Germany and the UK.

In the US, sales grew 7 per cent to $95 million (approximately Rs 380 crore) in Q2 CY07, helped by the launch of pravastatin (medication for reducing cholesterol levels), which would also earn high margins in the exclusivity period.

Meanwhile in the domestic market, the company's sales growth was a solid 19 per cent y-o-y in the last quarter. Short-term growth would be driven by sales of pravastatin and its expansion in emerging markets.

However, the stock has underperformed the broader market, it has gained merely 3.8 per cent over the past three months compared wih a 12.5 per cent rise in the Sensex. That's because the Ranbaxy stock already trades at nearly 20 times estimated CY07 earnings.

Petronet LNG: Improved utilisation

Petronet LNG reported an improved performance in the June 2007 quarter helped by improved utilisation at its Dahej capacity and an increase in spot cargoes processed on a y-o-y basis, which helped expand regassified quantity.

The company imports liquefied natural gas on contracted and spot basis, regassifies it and sells it. Gail, ONGC, IOC and BPCL are its promoters.

In Q1 FY08, operating profit grew an impressive 56.6 per cent y-o-y to Rs 204.9 crore in the last quarter, while income from operations improved 52.2 per cent to Rs 1551.02 crore.

The operating profit margin also expanded 40 basis points y-o-y to 13.2 per cent during the quarter. The improved performance by the company has not gone unnoticed by the Street - the stock has gained nearly 35 per cent during this period as compared to an 11 per cent rise in the Sensex.

The company processed 4.5 cargoes in the last quarter compared with one cargo in the corresponding period of the previous year.

As natural gas gains increasing acceptance among domestic user industries such as fertilisers, Petronet has been able to see demand for its higher-margin spot LNG in the last quarter, highlight analysts. Its regassified quantity was 78.62 trillion btu (British thermal unit) in Q1 FY08 compared with 63.15 trillion btu a year earlier.

In addition, during the June 2007 quarter, Petronet had entered into an agreement with the Qatar-based RasGas for 1.25 mmtpa of natural gas for its Dahej terminal.

Though this is a short-term contract from July 2007 to March 2008, analysts point out it generates confidence in the company's ability to source higher natural gas volumes over the next few quarters. The stocks trades at 13-14 times estimated FY08, which considering its growth prospects appears reasonable.