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| India Infoline Research Team / 09:22 , Feb 24, 2012 |
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CMP Rs440
- Q4 Revenues up by 78% yoy and 81% qoq at Rs37.9bn, led by most awaited launch of generic Lipitor and Caduet-Authorised generic(AG).
- Excluding one-offs base business recorded flat growth in USD term; grew by 14% yoy in Rupee term.
- Domestic formulation market recorded muted growth at 8%
- Core US business contributed ~80mn in Q4 CY11 (~$300mn from exclusivity launch); expect similar run rate for CY12.
- EBITDA up by 273% at Rs8.6bn and Adj PAT grew by 3x to Rs6.3bn
- Guidance for clocking in US$2.2bn revenues in CY12 with continuous expansion in EBITDA margin in base business
Result table
(Rs mn)
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Q4CY11
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Q4CY10
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% yoy
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Q3CY11
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% qoq
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Net sales
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37,923
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21,287
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78.1
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20,955
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81.0
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(Inc)/dec in stock
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338
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(405)
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(183.5)
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(623)
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(154.2)
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Consumption of Materials
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(6,212)
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(5,155)
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20.5
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(5,594)
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11.0
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Purch of Tra Goods
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(4,382)
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(3,958)
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10.7
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(3,475)
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26.1
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Employees' Cost
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(4,010)
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(3,835)
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4.6
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(4,080)
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(1.7)
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Other Expenditure
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(14,381)
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(6,442)
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123.2
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(6,688)
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115.0
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Operating profit
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8,600
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2,302
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273.6
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1,741
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394.0
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OPM (%)
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22.7
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10.8
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1186 bps
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8.3
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1437 bps
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Depreciation
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(1,681)
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(1,030)
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63.2
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(788)
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113.5
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Net Interest income
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(304)
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(145)
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109.4
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(153)
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98.5
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Other income
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1,632
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770
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111.8
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1,020
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59.9
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PBT
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8,247
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1,897
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334.6
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1,820
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353.0
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Forex (loss)/gain on loan
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(2,421)
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170
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(1,522.4)
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(2,510)
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(3.5)
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Other Exceptional
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(8,379)
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(2,115)
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296.1
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(3,624)
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131.2
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Tax
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(747)
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(880)
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(15.1)
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(256)
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191.7
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Effective tax rate (%)
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9.1
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46.4
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(3730) bps
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14
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(501) bps
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Reported PAT
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(29,781)
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(927)
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3,111.6
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(4,569)
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551.8
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Minority and share of Ass
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47
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48
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(1.1)
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77
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(38.5)
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Reported PAT
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(29,828)
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(975)
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2,959.5
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(4,646)
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542.0
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Adj Pat
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6,350
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1,461
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334.6
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1,402
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353.0
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PAT margin (%)
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17
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7
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988 bps
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7
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1006 bps
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Ann. Adj EPS (Rs)
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24
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6
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333.7
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13
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81.0
| Source: Company, India Infoline Research
Q4 Revenues up by 78% yoy and 81% qoq at Rs37.9bn led by most awaited launch of generic Lipitor and Caduet-Authorised generic(AG).
For Ranbaxy Q4 CY11 was a much awaited extra ordinary quarter. Ranbaxy launched Lipitor which contributed ~$US300mn to US revenues. There was an arrangement between Ranbaxy and Teva for the Lipitor launch. We believe the payment to Teva on Lipitor would be ~US$150mn which was included in other expenses, hence limiting EBITDA expansion. Management indicated that Lipitor has ~42% market share with a price erosion of 65%. Management remains confident about retaining the higher share post exclusivity. We believe price erosion would be steep (~95%) after the competition creeps in post exclusivity.
Domestic formulation market recorded muted growth at 8%
Sales for the Q4 CY11 for India were Rs4.8bn recording a growth of 8% yoy. According to IMS, Ranbaxy's growth for the year was 16% versus 15% for the domestic pharma market. Ranbaxy's growth in chronic sector for a year was in line with the industries chronic growth of 18%. Sales in consumer healthcare division of the company for the quarter were Rs894mn. The company will now work on a consolidated effort towards Indian market, which includes brand building for key products and new launches to create a consolidated strength in the region.
Cost analysis
As a % of net sales
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Q3FY12
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Q3FY11
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bps yoy
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Q2FY12
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bps qoq
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Raw material
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17.3
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22.3
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(504)
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23.7
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(645)
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Purchases
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11.6
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18.6
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(704)
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16.6
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(503)
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Personnel Costs
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10.6
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18.0
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(744)
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19.5
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(890)
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Other Expenditure
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37.9
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30.3
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766
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31.9
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601
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Total costs
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77.3
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89.2
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(1,186)
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91.7
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(1,437)
| Source: Company, India Infoline Research
EBITDA up by 273% at Rs8.6bn and Adj PAT grew by 3x to Rs6.3bn
Ranbaxy reported an OPM of 22.7%. Management indicated the improvement in EBITDA margins for the quarter is on the back of improvement in the base business and revenues from Lipitor. On a full year basis, the company reported 18% EBITDA margins. Adjusted pat grew by 3x to Rs6.3bn. During the quarter the company provided $500 million for settlement with in case of eventual analysis for US FDA issues impacting reported PAT. Even Rupee depreciation had a large adverse impact on the company's results.
Key Take-away from Conference Call
- As part of settlement, company shared Lipitor revenues till Dec 2011 with Teva
- Company started supply of Nexium formulations to AstraZeneca which is included in the US segment, this supply contract may continue even after Ranbaxy’s launch in CY14
- Company received approval for Mohali facility
- Company will not make any infrastructure investments for the facilities under inspection, the only cost company will have to incur will be for the consultants
- The three 180-day marketing exclusivities which Ranbaxy will give up are not the major ones, thus loss of these exclusivities will not have any significant impact on the revenue
- Data Integrity officials will be appointed in the last week of Feb 2012
- The derivative exposure is now down to $654 million and at $200 million every year till 2014-2015.
- Consumption of raw materials include inventory write of Rs620mn
- Depreciation includes impairment of plant of Rs800mn
- Other income includes forex gain of Rs950mn
- Guidance for clocking in US$2.2bn revenues in CY12 with continuous expansion in EBITDA margin in base business
Pressure on valuation to continue
We expect Ranbaxy to continue to trade at lower band of its valuations on the back of 1)concerns over its US FDA issues, 2) slow ramp up in domestic market (lower than market growth continues), and 3) continuous pressure at margin front.
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