HSBC
Ranbaxy reported improvement in margins on back of better US sales. US sales beat expectations on stronger traction in Absorica. Ebitda margins, excluding forex of 9.8%, beat estimates by c250bps on better US sales and controlled other expenses. We reduce our target price to R440 (from R518) and maintain our ?overweight? rating.
Ranbaxy reported net loss of R520 crore against our expectation of R550 crore. This includes: a) transaction forex loss R62.8 crore; b) forex loss on loans worth R110 crore; c) mark-to-market loss on hedges R370 crore; and d) goodwill impairment in France subsidiary of R120 crore. Excluding these exceptional items, the adjusted net profit of R130 crore was 34% higher than our estimate, driven by better gross margins and lower other expenses.
US sales at R770 crore were higher than our estimate of R650 crore, driven by stronger traction in Absorica, which now holds c14% market share. The company also holds c24% share in gActos and c43% share in gEvoxac. The generic variant of Pristiq is seeing slower traction and will see incremental competition from Khedezla from Osmotica. The launch of gValcyte and gXimino in the next few months, and gDiovan possibly in CY13, should ramp up US sales further.
Contrary to our earlier expectation of c5% of sales, Ranbaxy has guided to c8% of India prescription sales being impacted by the new pricing control order, which is significant. We, therefore, reduce our India growth assumption.
Buy NMDC on favourable regulations
Kotak Institutional Securities
NMDC reported Ebitda of R1,900 crore (+9% q-o-q, -17% y-o-y), 9% ahead of our estimate. This was led by better-than-expected blended realisation of R3,950/tonne (+2% q-o-q), possibly on favourable product mix. NMDC has cut monthly lump prices by R200/tonne for August 2013 on weak seasonal demand, but kept fines prices unchanged ? built in our estimates.
Inexpensive valuations of 2.8X FY2014 estimated Ebitda, increasing dividend payout and changing regulatory framework that favours clean miners make NMDC a compelling buy. NMDC reported 1QFY14 sales volume of 7.3 million tonne (+6% y-o-y) and production volume of 6.8 million tonne (flat y-o-y).
Sales volumes increased 14% y-o-y to 2.2 million tonne in Karnataka and 3% y-o-y to 5 million tonne in Chhattisgarh. Chhattisgarh volumes were impacted in June 2013 due to lower rake availability as Naxalites had stopped railway movement during night for a brief period of 10 days.
Better-than-expected blended realisations of R3,950/tonne led to 4% q-o-q increase in Ebitda/tonne to R2,620. Sequential increase in blended realisations was despite 8% q-o-q decline in average lump prices during the quarter and lower export volumes of 7% of sales in Q1FY14 compared to 10% in Q4FY13 ? higher exports jack up the realizations as well costs for NMDC.