Will June quarter results boost Ranbaxy's prospects?

Analysts say company to see improved performance on sequential basis

Ranbaxy has seen its market cap erode 43% since mid May on the back of FDA related issues getting highlighted. The company paid $500 million as penalty for settling the issues, however, its stock prices have still not recovered. The stock hit a 52 week lows of Rs 253.95 on 2nd August and is trading at Rs 271 levels.

Whether the June 2013 quarter results, likely to be declared today, are able to boost confidence of the investor’s still remains to be seen.

If one goes by the analyst’s estimates the company will see improved performance on sequential basis.

Hitesh Mahida at Fortune Equity brokers expects the sequential improvement to continue, driven by improvement in sales of Generics of Acne treatment drug Absorica, launched in the December 2012 quarter. The sales from the product are estimated at $23 million during the June 2013 quarter compared to $9 million during the March 2013 quarter.

With The USFDA issues being settled there is expected to be gradual reduction in remediation costs (costs on Consultants etc).  

Thus consensus Revenue estimates at Rs 2,684.3 crore as per Bloomberg indicate a growth of 7.5% on sequential basis. EBIDTA margins at 9.2% are likely to be much better than 6.2% in previous quarter, while adjusted profits at Rs 84.74 crore are likely to almost double from Rs 43.9 crore.

The negative surprise, however, can come from the bottom line, considering the fact that the Company had derivative exposure of around $962 million at the end of March 2013 quarter. Thus looking at rupee depreciation the forex losses will have to be watched for.

The revenues and profitability in June 2013 quarter, however, will be much lower than what was seen in June 2012 quarter. June 2012 quarter had been boosted by Lipitor generic contributions, the exclusivity for which ended in May 2012.