Brokers’ picks: Ranbaxy and RIL

Ranbaxy to ‘Outperform'
Target: Rs 550

Current price: 431
> Ranbaxy remains among Macquarie’s top picks in the Indian pharma space, along with Glenmark Pharmaceuticals and they highlight weakness as an excellent opportunity to add with a 12-month view.

> After adjusting for FTF exclusivity, Ranbaxy trades at ~16.5x CY14E EPS Ramp-up of the derma branded franchise in the US, better asset utilization with incremental FDA approvals and operating leverage in EM markets will drive margin expansion.

Goldman Reiterates ‘Buy’ on RIL

Target: Rs 1,140
Current price: 884

> Goldman Sachs has raised its FY14E-17N EPS to 11-16% on benefits of higher dollar-rupee rates.

> RIL’s implied 4-year valuation suggests +108% variance vs. its current price, with a blue-sky market cap of $106 billion in FY17N if RIL continues on the roadmap.

> RIL’s $15.7 billion present cash balance and significant free cash flow from FY17N warrant a capital allocation policy for shareholders.