The Hindu Business Line : Ranbaxy falls on slow growth concern

THE Ranbaxy Laboratories stock has been on a downward move in the last few days on concerns of fall in profit in the next few years due to increased competition in its generics business, analysts said.

The stock price of the company is down from Rs 977.75 on August 11 to today's closing price of Rs 921.95 on BSE, a fall of 5.7 per cent.

According to foreign broking firm CLSA, "2006 is expected to be a bumper year for the generic industry with close to $20 billion in patent expiries and Ranbaxy would be also ride the storm with its presence in statins and other products." But the broking firm said the next 12-15 months are expected to be relatively quiet because of the absence of significant product launches.

It said Ranbaxy's brand business, which has long-term importance, has been slow in picking up.

On these concerns, the firm has cut down Ranbaxy's EPS estimates by 4 per cent and 8 per cent for 2004 and 2005 respectively.

Analysts said over the next 12 -15 months, there will be a lull in significant product launches and about 8-10 launches of vanilla products from Ranbaxy. These include Ceftin suspension, Citalopram, Cilostazol, Glimeperide, Claritin D, and Clarithromycin.

Most of the analysts have included these in their forecasts, but have reduced the revenue potential because of higher competition.

Another concern of the market players is that the Ranbaxy stock is trading at a premium of other generics pharma company in the world in terms of price-earnings ratio. According to them, the Ranbaxy stock trades at P/E ratio of 22.3 on 2004-05 earnings while the stock of Teva, a leading Israeli generic company, trades at P/E of 19.5 while the average P/E of global generics company is around 17.

But analysts maintain that Ranbaxy has the best business model among the Indian pharma companies and from 2006 there would be sharp growth in the company's business.

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