Ranbaxy shares surge above expectation

Even as stock market analysts expect only a modest financial performance for India’s largest drug maker, Ranbaxy, during the July-September quarter, the company shares continue to outperform the market during the past three months.

The share price rose 35 per cent during the quarter as compared to a 12 per cent growth of the Sensex, the 30-stock bellwether index of the Bombay Stock Exchange over the same time, analysts note.

Ranbaxy shares went up 57 per cent during the past year, though there were no dramatic developments to push its price in recent months, said Ranjit Kapadia, Vice-President, Institutional Research, HDFC Securities.

Angel Broking, in its recent result preview, had estimated a top line growth of just 1.8 per cent, though it predicts a huge increase in net profits due to notional mark to market (revaluing assets at current prices) gains.

Ranbaxy’s two Indian manufacturing facilities continue to be under the US drug regulator, Food and Drug Administration’s scanner. Its US subsidiary is also facing regulatory heat. The domestic business has not picked up in spite of the appointment of about 1,500 sales representatives some nine months earlier. There is no visible trigger for an immediate improvement in the company’s performance, Kapadia said.

The company’s domestic business had grown 14.8 per cent, according to market research firm ORG (on a moving annual total basis), as compared to a 20.4 per cent growth for the entire domestic industry.

Hemant Bakhru, an analyst with brokerage firm CLSA, felt Ranbaxy shares were lagging for some time and the recent rise was more of a catching up.

“The company had recently won exclusive rights to sell the generic version of Aricept (Alzhiemer drug) for six months in the US. The company has also been having something or other every quarter to push up its sales. Further, some resolutions on the US Food and Drug Administration (the US regulator front are expected. All these are helping the stock,” Bakhru said.

Some experts also said Ranbaxy would show good growth in the domestic market in the coming January-March quarter, as that is the time when the result of its India-specific marketing thrust should begin to show results.

The closing share price of Ranbaxy on Friday at the Bombay Stock Exchange was Rs 579.75.

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