Friday, March 25, 2011

Ranbaxy is a great buy. 2012 EPS will more than quadruple from current levels

Ranbaxy is a great buy at current levels. The 2012 EPS numbers is expected to more than quadruple in 2012, by virtue of  FTF opportunites in Actos, Provigil, Solodyn, Lipitor and Diovan. The cumulative branded sales for these drugs is close to $14b. Assuming a 50% erosion in market size and a 25% market share for Ranbaxy(authorised generics take away 50% of market share), these drugs should fetch Ranbaxy annual sales of more than $1billion. The average profitbaility of the sales should be 55% and the resulting EPS impact would to Rs 60per share.

3 comments:

  1. thank you for the analysis.can you please post on jubilant life sciences?the stock has taken some beating..thank you and regards

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  2. Hi Lalit, Jubilant is a long bet, but I am sure nobody would regret staying invested in it.

    The best part of Jubilant business model is that it offers both custom research and contract manufacturing, which is kind of a must for success in the CRAMS business. Besides as far as contract manufacturing is concerned, they have the best backward integration, when compared to any other pharma company in India. Jubilant holds the top position as far as manufacturing of several API's are concerned. They are globally the largest manufacturer of five differet API's are concerned and it is a rare feet for any API comapny to achieve. Such scale adn backward integration offers them a very strong immunity from pricing pressures.

    The overall business model of Jubilant is very much scalable. They have sown the seeds and it will take time before the fruits are ready. Their contract research business is the one to watch out for, as this segment is growing globally at more than 40% CAGR. As Jubilant gains more expertise and trust of the global pharma companies, it business will grow manifold.

    Current valuations reflect that the market lacks the patience to hold on to the stock and hence if you have that patience, it is very much likely that you will be rewarded.

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  3. thank you for the reply.when everybody was screaming sell for ranbaxy you rightly said buy!now with the fda action against mylan people are recommending buy!was able to get into ranbaxy at a lower level thanks to you!jubilant also shot up but i had no funds:(
    being a doc bulk of my portfolio is in pharma..nectar and suven,i think,are good long term picks..thank you again and regards..

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