Ranbaxy Laboratories Limited
Price: Rs.654 EPS: Rs 7.68 Result: September Quarter

Top of the Mind
   
The company has a unique business model. It is investment intensive by nature. The idea has been possibly to create a worldwide manufacturing and distribution infrastructure, fully or partly owned and operated by itself. Today, Ranbaxy has a presence in over 40 countries with operations in 24 and manufacturing facilities in 6. More importantly its penetration into developed markets ensures higher realisation. However, the concern remains as most of its overseas subsidiaries are loss making. The consolidated result will unravel the issue. Another issue is the domestic formulation sales. The contribution from domestic market further declined during the quarter.

  

Key Highlights
Financials for the Quarter
(Rs Cr) Q3FY02 Q3FY01 Change
Net Sales 553.5 475.9 16.30%
Other Income 0.7 1.1 (36.36%)
Expenditure 459.1 397.3 15.55%
Operating Profit 95.1 79.7 19.32%
Depreciation 13.00 12.05 4.00%
PAT 89.1 53.1 67.79%
Net profit margin 16.09 11.15       
  • Topline grows 16.30% YoY in Q3FY02
  • Bottomline grows by about 67.79% YoY in Q3FY02
  • Net profit margin up 16.09% in Q3FY02 from 11.15% in Q3FY01
  • Extraordinary item stands at Rs 72.7 crore.
  • Provision & contingencies provided for Rs 30 crore

     

Performance Analysis

   

The company has recorded a net profit of Rs 89.1 cr for Q3FY02 as compared to Rs 53.1 crore in Q3FY01 beating market expectation. The surge in the net profit is largely from extraordinary income of Rs 72.7 crore derived from profit on sale of equity shares of Eli Lilly Ranbaxy Ltd during the quarter.

The net sales has grown by about 16.3% to Rs 553.5 crore as against Rs 475.9 crore last year, same quarter. Exports for the September quarter surged 24.3% (against 23.2% in Q2FY02) to 262.5 crore, again surpassing the expectations. However, domestic sales rose only 9% ( against 13.4% in Q2FY02) to 275.8 crore. The anti-infectives segment contributed 55% to the revenues while the cardiovascular segment contributed 8%. The raw material to sales ratio stood at 45.6 percent as against 47 percent last year.

During the quarter the company has provided for Rs 30 crore as provision for loss of investment in Vidyut Investments Ltd, which is a subsidiary of the company. Operating margins have improved by 3.3% and net margins for Q3FY02 stood at 16.09% against 11.15% last year, same quarter. However, there has been a sharp spurt in interest expenses which grew by more than 163% to Rs 21.6 crore as against 8.2 crore last year, same quarter. Tax provision also grew considerably on the back of change in accounting policy on deferred taxation.

Future Outlook
 
The company's product portfolio in the country primarily revolve around anti-infectives. The company, in recent times has also instituted its focus towards fast growing cardiovascular and nervous system drugs.

The positive developments in the market for generic drugs in the US is another actuality that augurs well for the pharma companies. Arguably, Ranbaxy is the best placed among Indian companies to make the best of opportunities that are coming up in the developed markets. Besides, the recent threat of biological and chemical war augurs well for Ranbaxy, having got ciprofloaxcin in its kitty, the patent of which is held by Bayer AG. Pharma industry sources indicate that pharmacist in New York are witnessing increased demand for Cipro which is used to treat a number of diseases and infections, including anthrax, a disease that causes bleeding blisters, difficulty in breathing, shock and coma.