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Markets have given a thumbs-up to Ranbaxy’s June quarter results that have shown an improvement in business growth in the US despite overall revenues slipping 17.8% to Rs 2,633 crore. The stock surged 13% in trade to Rs 317 levels.
Analysts expected the revenues to dip in the recently concluded quarter in the absence of one-off benefits. The company had gained good mileage from exclusivity sales of generics of cholesterol lowering drug, Atorvastatin, during the June 2012 quarter.
Nevertheless, the US business growth on sequential basis has restored markets confidence. The US sales at Rs 770 crore grew a good 29% in the June’13 quarter, as compared to Rs 595.6 crore clocked in the March’13 quarter. The fact that the recent quarter did not have any contribution from one-offs (launches on exclusivity) is being seen as a positive since the entire growth can then be attributed to base business.
US business growth
The US growth is being driven by the Acne treatment drug Absorica, which is doing well. Analysts estimate the drug to have clocked in $23-28 million in sales during the recently concluded quarter, as compared to around $9 million in the previous quarter. The management expects the product will do well going ahead and the market share will improve from the current levels of around 14%.
Hitesh Mahida, an analyst at Fortune Broking expects company’s US base business sales to improve going forward with gains from to Absorica and Desvenlafaxine (anti-depressant) and from the launch of Ximino, dermatology product. All eyes, however, are set on company being able to monetise the opportunities that generic launch of Diovan and Valcyte offer.
The launch of the above-mentioned products is important since Ranbaxy has exclusivity rights on them. While the markets expected the company to launch of generics of anti-hypertensive brand Diovan (Valsartan) in 2012, the launch of anti-viral brand Valcyte generics is expected in the second half of 2013.
Domestic market
On the flip side, the growth in other markets including India has not been encouraging, which is a cause for concern. The ex-US growth has come in at a meagre 2%. Though India-market growth has been impacted by the pricing policy issues and may remain volatile for some time, analysts will be keeping a tab on growth in the other regions.
Also, the margins have improved marginally from 6.2% in March’13 quarter to 7.4% now, which is much below than what Ranbaxy has enjoyed earlier. Thus there is still a long way to go for the company on this front.
Analysts have changed their target prices significantly post results. Jefferies has cut its target price to Rs 450 from Rs 520, though UBS has maintained its target price of Rs 400. Credit Suisse has cut its target price to Rs 310 from RS 420, while CLSA has cut its target price to Rs 330 from RS 380.
Overall out of 18 analyst recommendations post results, 14 have BUY ratings while four maintain hold rating with a consensus target price of Rs 394 as per Bloomberg data.
