In Q1’09, Ranbaxy Laboratories Limited’s revenue decreased (Ranbaxy) by 18.7% y-o-y as both developed and emerging markets under-delivered. Moreover, huge forex losses led to net loss of Rs7.8 billion for the reporting quarter.
In our view, the company is likely to fall short on its top line guidance of Rs70 billion and net loss guidance of Rs8 billion for CY09 in absence of a visible resolution to the USFDA regulatory issues and continued underperformance of European operations.
However, we believe that while the market already discounts the near-term negatives, the potential upside from better operational performance by new facilities at Ohm (USA), Mohali (India), and South Africa, monetization of FTF opportunities, and operational synergies from relationship with parent Daiichi Sankyo is not currently priced in.
Thus, we reiterate our HOLD rating on the stock.
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