Edelweiss Research: 'Buy' Ranbaxy

Edelweiss Research recommends a 'Buy' for Ranbaxy on the back of a delivered strong quarter.

The company posted an EPS of Rs 3.24. Ranbaxy displayed a revenue growth of 7%. However, the extent of cost cutting was 27% reduction in R&D and 7% reduction in SG&A- the main contributor to the EPS beat.

For the quarter, key growth drivers performed well indicating  the beginning of recovery of the business.

The main highlight was the growth of the US business (+16% or +10% currency adjusted). US business has grown for the second quarter in a row, something that should improve investor sentiment, in Edelweiss' view.

Edelweiss recommends a 'Buy' based on improving operations and earnings outlook projected at 38% through 2006-07. They believe potential upsides exist in the form of inorganic growth and higher cost cuts than guidance.