Broking firm, CLSA is bullish on Ranbaxy Labs. It has maintained an ‘outperform’ rating on the company with a target price of Rs 535.

According to CLSA, interested investors can purchase the stock between Rs 450-455 with a strict stop loss of Rs 435.

Shares of the company, on Friday (May 9), ended the week at Rs 469.45, down 0.13%, on the Bombay Stock Exchange (BSE). The total volume of shares traded at the BSE was 151,799. Current EPS and P/E ration stood at 16.38 and 28.67 respectively. The share price has seen a 52-week high of Rs 501 and a low of Rs 299.9 on BSE.

The highlight of Ranbaxy’s annual report is encouraging improvement in working capital proportions led by decrease in debtor days (from 95 to 82 in CY07).

EBITDA margins declined from 12.6% to 8.7% in CY07 because of pressures from currency appreciation, high base (Simvastatin exclusivity in CY06) and higher promotional spend. Revenue growth remained weak at 9.4% YoY due to rupee’s appreciation and listless growth in the US.

While the company’s global filings have declined, the US filings continue to be steady. Ranbaxy’s valuations are reasonable, given its strong earnings momentum, going forward. The stock is likely to remain firm with strong earnings visibility heading into CY09 and exclusivities on Imitrex, Flomax, Valtrex, Lipitor and Nexium.

Ranbaxy Laboratories is ready to sign up a significant research deal with US-based drug maker, Merck in order to discover new medicines.

The tie-up may generate substantial revenues for the Indian firm.

The recent deal will be operationalised through Ranbaxy Life Sciences, the new R&D division of Ranbaxy.
 
After GlaxoSmithKline, Merck will be the second international drug company to enter a collaborative research deal with Ranbaxy.

Ranbaxy would receive royalties and payments as the drug crosses important development milestones.

The company signed up the agreement with the UK-based GSK in February 2007 to develop new drugs in different areas including anti-infectives, metabolic disorders, respiratory diseases and cancer.

Ranbaxy also received final nod from USFDA to make and promote Certirizine Hydrochloride Oral Solution.

Besides, PE players and banks such as ICICI Venture, Yes Bank, GM Financial and Standard Chartered are also making discussions with SRL Ranbaxy for a minority stake before the company’s proposed IPO.

SRL Ranbaxy is Ranbaxy’s diagnostic chain.

SRL Ranbaxy has received expressions of interest (EoI) from several financial funds and talks are in final stage of negotiation.