Net sales of Ranbaxy Laboratories (Ranbaxy) de-grew by 0.7% - from Rs18.9 billion to Rs18.7 billion (we expected Rs16.3bn) in the recently concluded quarter.
This has been due to more-than-expected sales in India, Africa, Brazil, Global Consumer Healthcare and API segment.
Sales from India formulation grew by 21% due to 28 new product launches. Sales from Europe continue to de-grow due to channel de-stocking and product portfolio rationalization.
Other operating income (OOI) was Rs 873 million. This includes Rs170 million of Export incentive, and settlement money (settlement with Teva for fexofenadine) of Rs550 million.
The company has loss of Rs305 million at operational level (excl. OOI and forex gain) against a gain of Rs2.1 billion y-o-y. We expected profit of Rs368 million.
The deviation has been due to higher cost of sales and SG&A expenses. SG&A expense has been higher due to compensation paid to Mr. Malvinder Singh and higher FDA expense.
The company repaid the borrowing to the tune of Rs 33 billion in this quarter after receiving the sum of Rs 35.8 billion on allotment of equity shares and warrants to Daiichi Sankyo. Hence there has been reduction in interest amount. There has been a forex gain of Rs10.6 billion during the quarter.
Ranbaxy has sent corrective action plan for Paonta sahib plant for which FDA is expected to respond by July. It has taken corrective action in Dewas and is expected to send re-inspection letter to FDA soon.
There has been positive development with respect to solving this ongoing issue. However, the scenario still looks hazy.
At Rs280, the stock trades at 23.7x CY09E and 9.5x CY10E. We maintain REDUCE rating on the stock.