Hi Guys
Sorry for not posting during the difficult time
This is A new phase of the Stock Market in India , and i am damn sure bout that.
The market for the year will be volatile for sure, but 25 Jan 2008 is the day, mark my words friends, this is the day when you will have the full opportunity to go out there in the market and buy any share of your liking, and we guarantee you more than 25% returns.
Some of the share we recommend are
Alok
Arvind Mills
Adlabs
RPL
RNRL
Dena Bank
IDBI
Vijaya Bank
Sasken
Infosys
ISpat
Hind Motors
RIL
Rel Infra
Brigade
Ranbaxy
SBI
Icici
Balaji Telefilms
Avon
In Foils
IFCI
Moserbear
These scrips will rock 2008
Thursday, January 24, 2008
Best Buy Scrips
Hi Guys
Sorry for not posting during the difficult time
This is A new phase of the Stock Market in India , and i am damn sure bout that.
The market for the year will be volatile for sure, but 25 Jan 2008 is the day, mark my words friends, this is the day when you will have the full opportunity to go out there in the market and buy any share of your liking, and we guarantee you more than 25% returns.
Some of the share we recommend are
Alok
Arvind Mills
Adlabs
RPL
RNRL
Dena Bank
IDBI
Vijaya Bank
Sasken
Infosys
ISpat
Hind Motors
RIL
Rel Infra
Brigade
Ranbaxy
SBI
Icici
Balaji Telefilms
Avon
In Foils
IFCI
Moserbear
These scrips will rock 2008
Sorry for not posting during the difficult time
This is A new phase of the Stock Market in India , and i am damn sure bout that.
The market for the year will be volatile for sure, but 25 Jan 2008 is the day, mark my words friends, this is the day when you will have the full opportunity to go out there in the market and buy any share of your liking, and we guarantee you more than 25% returns.
Some of the share we recommend are
Alok
Arvind Mills
Adlabs
RPL
RNRL
Dena Bank
IDBI
Vijaya Bank
Sasken
Infosys
ISpat
Hind Motors
RIL
Rel Infra
Brigade
Ranbaxy
SBI
Icici
Balaji Telefilms
Avon
In Foils
IFCI
Moserbear
These scrips will rock 2008
Bank of India Update
Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs432
Current market price: Rs391
Q3FY2008 results: First-cut analysis
Result highlights
*
Bank of India's (BoI) profit after tax (PAT) during Q3FY2008 grew by a whooping 101% year on year (yoy) and 20.4% quarter on quarter (qoq) to Rs511.9 crore. The PAT growth was significantly above our and consensus estimates. The strong PAT growth was on the back of robust rise in the interest income, spike in the non-interest income led by treasury gains, and contained operating expenses.
*
The net interest income (NII) of Rs1,079.5 crore during the quarter indicates a robust growth of 25.7% yoy mainly due to continued strong growth in advances coupled with an improvement in the net interest margin (NIM).
*
The reported NIM of 3.14% for the quarter reflects an improvement of 10 basis points yoy from 3.04% for the year-ago period. The NIM improvement was mainly due to the improvement in yields on advances (115 basis points) and the investments (105 basis points), which outweighed the 83-basis-points year-on-year (y-o-y) increase in the cost of funds.
*
During the quarter, the advances grew by a strong 30% yoy to Rs103,657 crore indicating an uptick in the credit off take compared with H1FY2008. The growth in advances was led by a strong growth in foreign advances (up 32.7%). Meanwhile the deposits grew by 27.4% yoy to Rs135,835 crore on the back of a 36% y-o-y growth in the term deposits and a 32.5% y-o-y growth in the current account deposits. However, due to the higher growth in the term deposits, the current account and saving account (CASA) ratio declined to 37% for the quarter from 40.7% a year ago.
*
The non-interest income witnessed a whooping growth of 72% yoy to Rs554.1 crore. The growth in the non-interest income was primarily due to the surge in treasury gains, which were up 109% yoy. Meanwhile the fee income grew by a strong 39.5% yoy.
*
Notably, the operating expenses were up by only 5.5% yoy, whereas it declined by ~2% qoq to Rs 662.2 crore. The lower operating expense growth can be traced to the decline in other operating expenses (down 13% yoy), whereas the staff expenses were up 17% yoy. As a result of lower operating expenses and strong income growth, the cost-income ratio for the quarter improved significantly to 40.5% compared with 50.6% for the year-ago period.
*
Asset quality continued to improve yoy with a 10% y-o-y decline in the gross non-performing assets to Rs1,969.3 crore and a 29.5% decline in the net non-performing assets to Rs633.5 crore. Consequently, the provision coverage for the quarter improved significantly to 78% from 66% for the year-ago period.
*
Capital adequacy remains healthy with the capital adequacy ratio (CAR) at 12.5% at the end of December 2007 compared with 11.7% at the end of December 2006.
*
At the current market price of Rs391, BoI trades at 10.1x its 2009E earnings per share (EPS), 5x its 2009E pre-provisioning profit (PPP) and 2x its 2009E book value. In view of the higher-than-expected Q3FY2008 numbers, we intend to revisit our earnings model.
Cluster: Apple Green
Recommendation: Buy
Price target: Rs432
Current market price: Rs391
Q3FY2008 results: First-cut analysis
Result highlights
*
Bank of India's (BoI) profit after tax (PAT) during Q3FY2008 grew by a whooping 101% year on year (yoy) and 20.4% quarter on quarter (qoq) to Rs511.9 crore. The PAT growth was significantly above our and consensus estimates. The strong PAT growth was on the back of robust rise in the interest income, spike in the non-interest income led by treasury gains, and contained operating expenses.
*
The net interest income (NII) of Rs1,079.5 crore during the quarter indicates a robust growth of 25.7% yoy mainly due to continued strong growth in advances coupled with an improvement in the net interest margin (NIM).
*
The reported NIM of 3.14% for the quarter reflects an improvement of 10 basis points yoy from 3.04% for the year-ago period. The NIM improvement was mainly due to the improvement in yields on advances (115 basis points) and the investments (105 basis points), which outweighed the 83-basis-points year-on-year (y-o-y) increase in the cost of funds.
*
During the quarter, the advances grew by a strong 30% yoy to Rs103,657 crore indicating an uptick in the credit off take compared with H1FY2008. The growth in advances was led by a strong growth in foreign advances (up 32.7%). Meanwhile the deposits grew by 27.4% yoy to Rs135,835 crore on the back of a 36% y-o-y growth in the term deposits and a 32.5% y-o-y growth in the current account deposits. However, due to the higher growth in the term deposits, the current account and saving account (CASA) ratio declined to 37% for the quarter from 40.7% a year ago.
*
The non-interest income witnessed a whooping growth of 72% yoy to Rs554.1 crore. The growth in the non-interest income was primarily due to the surge in treasury gains, which were up 109% yoy. Meanwhile the fee income grew by a strong 39.5% yoy.
*
Notably, the operating expenses were up by only 5.5% yoy, whereas it declined by ~2% qoq to Rs 662.2 crore. The lower operating expense growth can be traced to the decline in other operating expenses (down 13% yoy), whereas the staff expenses were up 17% yoy. As a result of lower operating expenses and strong income growth, the cost-income ratio for the quarter improved significantly to 40.5% compared with 50.6% for the year-ago period.
*
Asset quality continued to improve yoy with a 10% y-o-y decline in the gross non-performing assets to Rs1,969.3 crore and a 29.5% decline in the net non-performing assets to Rs633.5 crore. Consequently, the provision coverage for the quarter improved significantly to 78% from 66% for the year-ago period.
*
Capital adequacy remains healthy with the capital adequacy ratio (CAR) at 12.5% at the end of December 2007 compared with 11.7% at the end of December 2006.
*
At the current market price of Rs391, BoI trades at 10.1x its 2009E earnings per share (EPS), 5x its 2009E pre-provisioning profit (PPP) and 2x its 2009E book value. In view of the higher-than-expected Q3FY2008 numbers, we intend to revisit our earnings model.
Canara Bank Update
Canara Bank
Recommendation: Buy
Price target: Rs315
Current market price: Rs274
Q3FY2008 results: First-cut analysis
Result highlights
*
Canara Bank during Q3FY2008 reported a profit after tax (PAT) of Rs458.8 crore beating our estimate of Rs410.4 crore. The Q3FY2008 PAT indicates a growth of 26.4% year on year (yoy) and 14.2% quarter on quarter (qoq), primarily driven by a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) for the quarter stood at Rs934.4, down 1.3% yoy from the NII of Rs961.9 crore (adjusted for tax refund and amortisation) for the year-ago period. Excluding the adjustments, the NII would have declined by 10% yoy.
*
Meanwhile, the operating expenses grew by 13.5% yoy to Rs723 crore, mainly driven by a higher other operating expenses. Moreover, the other expenses are likely to remain high in the next quarter as well, owing to the re-branding exercise launched by the bank recently.
*
The provisions at end of the quarter stood at Rs199 crore, down 24.3% yoy while up 11.3% qoq. The lower provisions yoy helped support a higher PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.6% year-on-year decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were largely flat at Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13.7% at the end of December 2007 compared with 12.7% at the end of December 2006 and 13.9% as at the end of September 2007.
*
At the current market price of Rs274, the stock is quoting at 6.6x FY2009E earnings per share (EPS), 3.4x its 2009E pre-provisioning profit (PPP) and 0.9x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Recommendation: Buy
Price target: Rs315
Current market price: Rs274
Q3FY2008 results: First-cut analysis
Result highlights
*
Canara Bank during Q3FY2008 reported a profit after tax (PAT) of Rs458.8 crore beating our estimate of Rs410.4 crore. The Q3FY2008 PAT indicates a growth of 26.4% year on year (yoy) and 14.2% quarter on quarter (qoq), primarily driven by a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) for the quarter stood at Rs934.4, down 1.3% yoy from the NII of Rs961.9 crore (adjusted for tax refund and amortisation) for the year-ago period. Excluding the adjustments, the NII would have declined by 10% yoy.
*
Meanwhile, the operating expenses grew by 13.5% yoy to Rs723 crore, mainly driven by a higher other operating expenses. Moreover, the other expenses are likely to remain high in the next quarter as well, owing to the re-branding exercise launched by the bank recently.
*
The provisions at end of the quarter stood at Rs199 crore, down 24.3% yoy while up 11.3% qoq. The lower provisions yoy helped support a higher PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.6% year-on-year decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were largely flat at Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13.7% at the end of December 2007 compared with 12.7% at the end of December 2006 and 13.9% as at the end of September 2007.
*
At the current market price of Rs274, the stock is quoting at 6.6x FY2009E earnings per share (EPS), 3.4x its 2009E pre-provisioning profit (PPP) and 0.9x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Union Bank of India Update
Union Bank of India
Recommendation: Buy
Price target: Rs230
Current market price: Rs200
Q3FY2008 results: First-cut analysis
Result highlights
*
For Q3FY2008 Union Bank of India reported a profit after tax (PAT) of Rs365 crore, beating our estimate of Rs298.8 crore. The Q3FY2008 PAT indicates a growth of 42.7% year on year (yoy), driven by a healthy growth in interest income and a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) stood at Rs788 crore, reflecting a growth of 14.9% yoy and 17.1% qoq. Meanwhile, the non-interest income witnessed a whooping growth of 69.3% yoy to Rs347.5 crore.
*
During Q3FY2008, the operating expenses jumped by 29.5% yoy to Rs499.7 crore. The growth can be traced to a 55.1% year-on-year (y-o-y) increase in the other operating expenses while, the staff expenses grew by 14.5% yoy. Despite the significant increase in the operating expenses, the cost-income ratio was marginally up by 1% to 44%.
*
Notably, the provisions during the quarter declined by 22.2% yoy on reported basis, which pushed the PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.1% y-o-y decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were down significantly by 60% to Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13% at the end of December 2007 compared with 13.2% at the end of December 2006 and 11.6% at the end of September 2007.
*
At the current market price of Rs200, the stock is quoting at 7.8x FY2009E earnings per share (EPS), 4x its 2009E pre-provisioning profit (PPP) and 1.5x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Recommendation: Buy
Price target: Rs230
Current market price: Rs200
Q3FY2008 results: First-cut analysis
Result highlights
*
For Q3FY2008 Union Bank of India reported a profit after tax (PAT) of Rs365 crore, beating our estimate of Rs298.8 crore. The Q3FY2008 PAT indicates a growth of 42.7% year on year (yoy), driven by a healthy growth in interest income and a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) stood at Rs788 crore, reflecting a growth of 14.9% yoy and 17.1% qoq. Meanwhile, the non-interest income witnessed a whooping growth of 69.3% yoy to Rs347.5 crore.
*
During Q3FY2008, the operating expenses jumped by 29.5% yoy to Rs499.7 crore. The growth can be traced to a 55.1% year-on-year (y-o-y) increase in the other operating expenses while, the staff expenses grew by 14.5% yoy. Despite the significant increase in the operating expenses, the cost-income ratio was marginally up by 1% to 44%.
*
Notably, the provisions during the quarter declined by 22.2% yoy on reported basis, which pushed the PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.1% y-o-y decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were down significantly by 60% to Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13% at the end of December 2007 compared with 13.2% at the end of December 2006 and 11.6% at the end of September 2007.
*
At the current market price of Rs200, the stock is quoting at 7.8x FY2009E earnings per share (EPS), 4x its 2009E pre-provisioning profit (PPP) and 1.5x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Balaji Telefilms
Balaji Telefilms
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs427
Current market price: Rs262
Raring to go
Result highlights
*
Balaji Telefilms Ltd's (BTL) operating performance for Q3FY2008 was below our expectations. The programming hours in the commissioned category increased to 233.5 hours during the quarter from 190.5 hours in Q2 with the launch of three new shows during the quarter. However, much lower realisations on these shows led to a more-than-expected decline in the blended realisations in the commissioned category to 31.7 lakh per hour.
*
The revenues for the quarter increased by 2.6% quarter on quarter (qoq) to Rs80 crore. The operating profit margin (OPM) declined to 33.2% in Q3FY2008 against a hefty 42.4% in Q2FY2008 due to lower blended realistions during the quarter. However, we believe this is a normal feature of the television content business wherein realisations pick up as the show stabilises over a period of time. The net profit for the quarter thereby declined by 28.4% qoq and 13.6% year on year (yoy) to Rs18.8 crore.
*
BTL has pounced on the opportunity provided by the increasing content demand in the Hindi general entertainment channel (GEC) space due to new channel launches. It has launched three new shows during the quarter—Kahe Naa Kahe and Kya Dil Main Hai on 9x and Kuchh Is Tarah on Sony. In the coming quarters, the company is looking at diversifying into reality shows. The management has hinted at launching two more shows (one of which will be on NDTV Imagine), a reality show and a soap in the coming quarter.
*
The launch of its Tamil and Telugu channels through its joint venture (JV) with Star has been delayed due to procedural issues, and we expect these channels to be launched only by Q1FY2009 end. We believe that the JV presents immense potential for value creation for BTL and consequently for its shareholders.
*
We remain positive on the television content and film businesses of BTL and its foray into regional entertainment that would enable it to grow from a TV content provider to a broadcaster. We maintain our sum-of-the-parts (S-O-T-P) price target at Rs427.
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs427
Current market price: Rs262
Raring to go
Result highlights
*
Balaji Telefilms Ltd's (BTL) operating performance for Q3FY2008 was below our expectations. The programming hours in the commissioned category increased to 233.5 hours during the quarter from 190.5 hours in Q2 with the launch of three new shows during the quarter. However, much lower realisations on these shows led to a more-than-expected decline in the blended realisations in the commissioned category to 31.7 lakh per hour.
*
The revenues for the quarter increased by 2.6% quarter on quarter (qoq) to Rs80 crore. The operating profit margin (OPM) declined to 33.2% in Q3FY2008 against a hefty 42.4% in Q2FY2008 due to lower blended realistions during the quarter. However, we believe this is a normal feature of the television content business wherein realisations pick up as the show stabilises over a period of time. The net profit for the quarter thereby declined by 28.4% qoq and 13.6% year on year (yoy) to Rs18.8 crore.
*
BTL has pounced on the opportunity provided by the increasing content demand in the Hindi general entertainment channel (GEC) space due to new channel launches. It has launched three new shows during the quarter—Kahe Naa Kahe and Kya Dil Main Hai on 9x and Kuchh Is Tarah on Sony. In the coming quarters, the company is looking at diversifying into reality shows. The management has hinted at launching two more shows (one of which will be on NDTV Imagine), a reality show and a soap in the coming quarter.
*
The launch of its Tamil and Telugu channels through its joint venture (JV) with Star has been delayed due to procedural issues, and we expect these channels to be launched only by Q1FY2009 end. We believe that the JV presents immense potential for value creation for BTL and consequently for its shareholders.
*
We remain positive on the television content and film businesses of BTL and its foray into regional entertainment that would enable it to grow from a TV content provider to a broadcaster. We maintain our sum-of-the-parts (S-O-T-P) price target at Rs427.
Genus Power Infr Update
Genus Power Infrastructures
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs803
Current market price: Rs680
Price target revised to Rs803
Result highlights
*
For Q3FY2008, the net sales of Genus Power Infrastructures Ltd (GPIL) grew by 25.2% year on year (yoy) to Rs105.3 crore, which was marginally below our estimates.
*
The operating profit for the quarter grew by 30.8% to Rs16.5 crore. The operating profit margin (OPM) expanded by 70 basis points yoy to 15.7%, which was in line with our expectation. The OPM improved on account of operating leverage.
*
The interest cost increased by 10.7% yoy to Rs4.7 crore while, the depreciation charge declined by 14.7% yoy to Rs1.2 crore.
*
A larger contribution from the Haridwar plant (which falls in the tax-free zone) resulted in the lower tax rate of 10.9% for the quarter as compared with 14.7% in the same quarter last year. Consequently, the net profit grew by 59.2% yoy to Rs9.97 crore as against our estimates of Rs10.8 crore.
*
The current order book of the company stands at Rs400 crore, which is 1.1x its FY2007 sales. The company is also the lowest bidder for orders close to Rs800 crore.
*
For the nine months of FY2008, GPIL reported a spectacular revenue growth of 35.9% yoy to Rs289.6 crore, whereas the profits grew by 67.5% yoy to Rs26.1 crore.
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs803
Current market price: Rs680
Price target revised to Rs803
Result highlights
*
For Q3FY2008, the net sales of Genus Power Infrastructures Ltd (GPIL) grew by 25.2% year on year (yoy) to Rs105.3 crore, which was marginally below our estimates.
*
The operating profit for the quarter grew by 30.8% to Rs16.5 crore. The operating profit margin (OPM) expanded by 70 basis points yoy to 15.7%, which was in line with our expectation. The OPM improved on account of operating leverage.
*
The interest cost increased by 10.7% yoy to Rs4.7 crore while, the depreciation charge declined by 14.7% yoy to Rs1.2 crore.
*
A larger contribution from the Haridwar plant (which falls in the tax-free zone) resulted in the lower tax rate of 10.9% for the quarter as compared with 14.7% in the same quarter last year. Consequently, the net profit grew by 59.2% yoy to Rs9.97 crore as against our estimates of Rs10.8 crore.
*
The current order book of the company stands at Rs400 crore, which is 1.1x its FY2007 sales. The company is also the lowest bidder for orders close to Rs800 crore.
*
For the nine months of FY2008, GPIL reported a spectacular revenue growth of 35.9% yoy to Rs289.6 crore, whereas the profits grew by 67.5% yoy to Rs26.1 crore.
Ranbaxy Update
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs350
Price target revised to Rs558
Result highlights
*
Ranbaxy Laboratories (Ranbaxy)'s performance in Q4CY2007 and CY2007 has been above expectations. Its consolidated revenues grew by 5.1% in rupee terms to Rs1,784.50 crore in Q4CY2007 and by 9.5% to Rs6,017.0 crore in CY2007. The growth in dollar terms was more robust: 19% in Q4CY2007 and 20% in CY2007.
*
The growth was driven by a 24% growth in the sales to the emerging markets and a steady growth of 14% in the sales to the developed markets. The US business declined by 3.7% (on a high base of Q4CY2006 when the company had recorded substantial revenues from exclusivity opportunities) to $104 million during the quarter. However, the base business in the USA (excluding the impact of exclusivity revenues) grew by 8%.
*
Despite the sharp appreciation in the rupee and the high base of Q4CY2006 (when the company had recorded high-margin Simvastatin revenues under exclusivity), the company's operating profit margin (OPM) expanded by 100 basis points year on year (yoy) to 16.7%. Consequently, the operating profit of the company rose by 11.7% to Rs297.7 crore in Q4CY2007.
*
Despite a 55.5% rise in the interest expense and a 76.6% decline in the foreign exchange (forex) gains recorded by the company in Q4CY2007, the net profit rose by 1.1% to Rs187.9 crore. This was above our estimate of Rs164.7 crore.
*
For CY2007, Ranbaxy's consolidated revenues grew by 20% to $1,607 million. However, due to the impact of the appreciating rupee, the growth in rupee terms was more moderate at 9.5% to Rs6,590.4 crore. The sales reported by the company were ahead of our estimates. The net profit for CY2007 stood at Rs790.1 crore, up by 53.3% yoy. Excluding the impact of forex gains, the net profit stood at Rs606.9 crore, a growth of 15% yoy.
*
Ranbaxy has decided to demerge its new drug discovery research (NDDR) operations into a separate entity effective from January 1, 2008 and list it subsequently. While the specific framework and other details of the de-merger are currently under finalisation and will be announced by February 2008, the management has indicated that the company will save about $20-25 million of expenses incurred on NDDR projects annually from CY2008 onwards. The announcement of the details of the demerger scheme will act as a near-term catalyst for the stock.
*
The management has guided towards an 18-20% top line growth in dollar terms in CY2008. That's an expansion of the OPM from 15.1% in CY2007 to 17.5-18% in CY2008, resulting in a net profit growth of 20-25% in CY2008. This guidance is excluding any revenues and profits from the exclusivity opportunities in the USA.
*
We have upgraded our estimates to reflect the guidance provided by the management. Based on our new estimates, we expect Ranbaxy's recurring revenues (excluding the exclusivity opportunities) to grow by 18.2% in CY2008 to $1,900 million and by 16.0% in CY2009 to $2,202.0 million. However, the growth in rupee terms will be lower (as per our assumption of continued rupee appreciation) at 12.5% to Rs7,412 crore in CY2008 and at 12.9% to Rs8,369 crore in CY2009. This will result in a recurring net profit growth (excluding the extraordinary items) of 8% to Rs852.2 crore in CY2008 and of 15% to Rs980.3 crore in CY2009. This will, in turn, translate into fully diluted earnings of Rs21.3 and Rs24.5 in CY2008 and CY2009 respectively.
*
Ranbaxy believes that it has first-to-file (FTF) status on approximately 18 Para IV abbreviated new drug application (ANDA) filings, representing a market size of about USD27 billion. It expects to monetise at least one FTF opportunity every year for the next few years and has already announced the opportunities until CY2010 (generic Imitrex in CY2008, generic Valtrex in CY2009 and generic Lipitor and Flomax in CY2010). Based on our discount-cash-flow (DCF) calculations, we believe that the FTFs announced so far are collectively valued at Rs2,716 crore, translating into a per share value of Rs68.
*
Using the sum-of-the-parts valuation method, we arrive at a fair value of Rs558 per share for Ranbaxy (after assigning a 20x multiple to CY2009E base earnings per share of Rs24.5 plus the Rs68 per share value of the FTFs). At the current market price of Rs350, Ranbaxy is trading at 16.4x its estimated CY2008 and 14.3x its estimated CY2009 earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs558, an upside of 52% from the current levels.
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs350
Price target revised to Rs558
Result highlights
*
Ranbaxy Laboratories (Ranbaxy)'s performance in Q4CY2007 and CY2007 has been above expectations. Its consolidated revenues grew by 5.1% in rupee terms to Rs1,784.50 crore in Q4CY2007 and by 9.5% to Rs6,017.0 crore in CY2007. The growth in dollar terms was more robust: 19% in Q4CY2007 and 20% in CY2007.
*
The growth was driven by a 24% growth in the sales to the emerging markets and a steady growth of 14% in the sales to the developed markets. The US business declined by 3.7% (on a high base of Q4CY2006 when the company had recorded substantial revenues from exclusivity opportunities) to $104 million during the quarter. However, the base business in the USA (excluding the impact of exclusivity revenues) grew by 8%.
*
Despite the sharp appreciation in the rupee and the high base of Q4CY2006 (when the company had recorded high-margin Simvastatin revenues under exclusivity), the company's operating profit margin (OPM) expanded by 100 basis points year on year (yoy) to 16.7%. Consequently, the operating profit of the company rose by 11.7% to Rs297.7 crore in Q4CY2007.
*
Despite a 55.5% rise in the interest expense and a 76.6% decline in the foreign exchange (forex) gains recorded by the company in Q4CY2007, the net profit rose by 1.1% to Rs187.9 crore. This was above our estimate of Rs164.7 crore.
*
For CY2007, Ranbaxy's consolidated revenues grew by 20% to $1,607 million. However, due to the impact of the appreciating rupee, the growth in rupee terms was more moderate at 9.5% to Rs6,590.4 crore. The sales reported by the company were ahead of our estimates. The net profit for CY2007 stood at Rs790.1 crore, up by 53.3% yoy. Excluding the impact of forex gains, the net profit stood at Rs606.9 crore, a growth of 15% yoy.
*
Ranbaxy has decided to demerge its new drug discovery research (NDDR) operations into a separate entity effective from January 1, 2008 and list it subsequently. While the specific framework and other details of the de-merger are currently under finalisation and will be announced by February 2008, the management has indicated that the company will save about $20-25 million of expenses incurred on NDDR projects annually from CY2008 onwards. The announcement of the details of the demerger scheme will act as a near-term catalyst for the stock.
*
The management has guided towards an 18-20% top line growth in dollar terms in CY2008. That's an expansion of the OPM from 15.1% in CY2007 to 17.5-18% in CY2008, resulting in a net profit growth of 20-25% in CY2008. This guidance is excluding any revenues and profits from the exclusivity opportunities in the USA.
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We have upgraded our estimates to reflect the guidance provided by the management. Based on our new estimates, we expect Ranbaxy's recurring revenues (excluding the exclusivity opportunities) to grow by 18.2% in CY2008 to $1,900 million and by 16.0% in CY2009 to $2,202.0 million. However, the growth in rupee terms will be lower (as per our assumption of continued rupee appreciation) at 12.5% to Rs7,412 crore in CY2008 and at 12.9% to Rs8,369 crore in CY2009. This will result in a recurring net profit growth (excluding the extraordinary items) of 8% to Rs852.2 crore in CY2008 and of 15% to Rs980.3 crore in CY2009. This will, in turn, translate into fully diluted earnings of Rs21.3 and Rs24.5 in CY2008 and CY2009 respectively.
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Ranbaxy believes that it has first-to-file (FTF) status on approximately 18 Para IV abbreviated new drug application (ANDA) filings, representing a market size of about USD27 billion. It expects to monetise at least one FTF opportunity every year for the next few years and has already announced the opportunities until CY2010 (generic Imitrex in CY2008, generic Valtrex in CY2009 and generic Lipitor and Flomax in CY2010). Based on our discount-cash-flow (DCF) calculations, we believe that the FTFs announced so far are collectively valued at Rs2,716 crore, translating into a per share value of Rs68.
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Using the sum-of-the-parts valuation method, we arrive at a fair value of Rs558 per share for Ranbaxy (after assigning a 20x multiple to CY2009E base earnings per share of Rs24.5 plus the Rs68 per share value of the FTFs). At the current market price of Rs350, Ranbaxy is trading at 16.4x its estimated CY2008 and 14.3x its estimated CY2009 earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs558, an upside of 52% from the current levels.
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