>RANBAXY: Launch of CIP‐Isotretinoin

Ranbaxy Laboratories, is positive on impending opportunities like CIPIsotretinoin, Atorvastatin and others. Derivatives as an overhang will decline 15 % by Apr’13, Ranbaxy will be able to leverage rest of the revenues at better realizations. We upgrade our rating on the stock to “BUY”..

CIP‐Isotretinoin: This branded prescription product is likely to be launched in Q4CY12 and scale up will happen only in CY13. We believe the product had revenues of US$60‐70 mn before the product was withdrawn. We upgrade our revenues from the same to US$15 mn (vs. US$10 mn) in CY12E and to US$75 mn (vs. US$60 mn) in CY13E.

Atorovastatin: Despite 4 weeks of generic competition and price erosion of 96 % plus, Ranbaxy enjoys 44 % market share. Genericisation of Atorovastatin has resulted in a 10% reduction in volume of Simvastatin, which have benefited Atorovastatin. We factor US$82 mn revenues from Atorvastatin for CY12.

Derivatives: Ranbaxy has outstanding calls to the tune of US$1.5 bn sold at Rs 44, which will be exhumed to the tune of US$40‐50 mn per mth and will be entirely extinguished by CY16E. Assuming US$100 mn net revenues Ranbaxy will be able to garner US$60 mn at higher forex rates.

Outlook & Valuation

Ranbaxy is steadily increasing its US revenue traction based on the FTFs. Opportunities such as CIP‐Isotretinoin in CY12‐end, positive news flow on consent decree, and market traction in domestic formulations stand in good stead. Better realization on the bigger pie, as the derivatives contracts get exhumed, shift of Lipitor sales to Mohali facility by Apr’13 and approval for the Indian facility would all be EBIDTA accretive for Ranbaxy.

We revise our USD rates to Rs. 52 for CY12 (Rs 49.5) and to Rs. 50 for CY13 (Rs 48.5). We upgrade our earnings for CY12E by 1.6% to Rs. 25.4 and for CY13E by 14.2% to Rs 28.9 and our rating on the stock to “BUY” with a target price of Rs 609 per share. We value the core business of Ranbaxy at Rs 578 based on 20xCY13E and add an Option value of Rs. 31 for Actos, Valcyte, and Nexium.

To read report in detail: RANBAXY

RISH TRADER