Ranbaxy gains 34%: Five reasons why the stock was on a high
The surge comes on a day when Malaysia allotted its JV the site for a manufacturing unit, and a day after the firm reported Q2 earnings.
By ET Online | Updated:
NEW DELHI: Shares of Ranbaxy rallied 34 per cent in intraday trade on the BSE on Thursday, a day when Malaysia allocated RMSB, its joint venture with Malaysian shareholders, space for setting up a greenfield manufacturing unit; and also a day after the company reported earnings for the second quarter of the calendar year 2013.
The pharma major finally ended 27.49 per cent higher at Rs 359.40, from Wednesday's closing price of Rs 281.90. It hit a low of Rs 279 and a high of Rs 377.70 in the intraday trade on the Bombay Stock Exchange (BSE).
Ranbaxy Labs posted a consolidated net loss of Rs 524.24 crore for the quarter ended June 30, 2013, mainly on account of foreign exchange losses and goodwill impairment in its operations in France.
However, analysts at most brokerage firms are of the view that Ranbaxy is a ‘good' buy with a limited risk given the fact the stock has already corrected a lot so far in 2013.
We have collated top five reasons which could have aided the sharp rise in the stock price of Ranbaxy in today's trade:
Ranbaxy Laboratories said that Ranbaxy Malaysia Sdn Bhd (RMSB), its joint venture with Malaysian shareholders, has been allocated site for setting up a greenfield manufacturing facility in Malaysia.
The JV company signed a 'letter of offer' agreement with Kulim Hi Tech Park (KHTP), a wholly owned state agency and industrial park that houses various other leading industries located at Kulim, Ranbaxy Laboratories said.
Ranbaxy Laboratories holds a 71 per cent stake in the joint venture RMSB.
With strong operating performance and sales especially in US showing some sort of uptick in the base business is a positive sign for the pharma major, say analysts.
“Management guides gradual recovery in base margins, QoQ pick up in contractual payment from one time DOJ settlement related expense (non-recurring), step down of consent decree expense from 1QC14,” Sbicap Securities said in a report.
ROBUST US SALES IN THE QUARTER
“With healthy market share in generic Actos and Evoxac, along with scale up in Absorica, Ranbaxy's base business is strengthening,” Elara Securities said in a report.
“The company remains confident of monetizing generic Diovan and Valcyte (expecting launch in September 2013) this year. The company paid out US$ 500mn to the US FDA and DoJ during the quarter,” added the report.
US quarter run rate have further improved to $138mn from $110mn QoQ, led by MS gains in Absorica (14% vs. 10% qoq).
“Further traction in Absorica along with potential launches in Diovan (4QC13), Valcyte (4QC13) and Nexium (2QC14) expects to result in $626/$922mn in Sales for C13/14e,” say analysts.
The pharma major finally ended 27.49 per cent higher at Rs 359.40, from Wednesday's closing price of Rs 281.90. It hit a low of Rs 279 and a high of Rs 377.70 in the intraday trade on the Bombay Stock Exchange (BSE).
Ranbaxy Labs posted a consolidated net loss of Rs 524.24 crore for the quarter ended June 30, 2013, mainly on account of foreign exchange losses and goodwill impairment in its operations in France.
However, analysts at most brokerage firms are of the view that Ranbaxy is a ‘good' buy with a limited risk given the fact the stock has already corrected a lot so far in 2013.
We have collated top five reasons which could have aided the sharp rise in the stock price of Ranbaxy in today's trade:
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NOD FOR MANUFACTURING FACILITY IN MALAYSIARanbaxy Laboratories said that Ranbaxy Malaysia Sdn Bhd (RMSB), its joint venture with Malaysian shareholders, has been allocated site for setting up a greenfield manufacturing facility in Malaysia.
The JV company signed a 'letter of offer' agreement with Kulim Hi Tech Park (KHTP), a wholly owned state agency and industrial park that houses various other leading industries located at Kulim, Ranbaxy Laboratories said.
Ranbaxy Laboratories holds a 71 per cent stake in the joint venture RMSB.
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MARGIN IMPROVEMENTWith strong operating performance and sales especially in US showing some sort of uptick in the base business is a positive sign for the pharma major, say analysts.
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Core OPM picked up sharply at 9.8 per cent as compared to 7.6 per cent reported in 1Q. The management expects to scale up margins in coming quarters led by led by market share gains on Isotretinoin (from c. 14%), Africa+India biz recovery and strengthening manufacturing processes.“Management guides gradual recovery in base margins, QoQ pick up in contractual payment from one time DOJ settlement related expense (non-recurring), step down of consent decree expense from 1QC14,” Sbicap Securities said in a report.
ROBUST US SALES IN THE QUARTER
“With healthy market share in generic Actos and Evoxac, along with scale up in Absorica, Ranbaxy's base business is strengthening,” Elara Securities said in a report.
“The company remains confident of monetizing generic Diovan and Valcyte (expecting launch in September 2013) this year. The company paid out US$ 500mn to the US FDA and DoJ during the quarter,” added the report.
US quarter run rate have further improved to $138mn from $110mn QoQ, led by MS gains in Absorica (14% vs. 10% qoq).
“Further traction in Absorica along with potential launches in Diovan (4QC13), Valcyte (4QC13) and Nexium (2QC14) expects to result in $626/$922mn in Sales for C13/14e,” say analysts.
STOCK WAS HIGHLY OVERSOLD AHEAD OF RESULTS
Shares of Ranbaxy Laboratories came under pressure earlier in the year after the drug maker pleaded guilty to US felony charges related to drug safety and agreed to pay $500 million in settlement.
Ranbaxy Laboratories has plunged over 40 per cent so far in the year 2013 (as of data collected on August 7) largely on account of USFDA concerns.
"My sense is Ranbaxy is the next Sun Pharma or the next big story in the pharma space that is emerging, and if somebody has a patience I would look at it with a potential to be into the Rs 1000 category in probably about 18 months' time," said Prakash Diwan, Director, Altamount Capital Management in an interview with ET Now.
"We need to have some patience but it is finally good time as next set of earnings will not only show some growth in top line but it will also shows some new products getting accepted in a significant way for the company," he added.
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BROKERAGE VIEWS
Analysts at most brokerage firms are of the view that Ranbaxy is a ‘good' buy with a limited risk given the fact the stock has already corrected a lot so far in 2013.
As much as six global brokerage houses have ‘buy' or an ‘overweight' rating on Ranbaxy Laboratories post the Q2 results, but most of them have also revised their target price downwards.
With strong operating performance and sales especially in US showing some sort of uptick in the base business is a positive sign for the pharma major, say analysts.
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