RANBAXY LABORATORIES LTD RESEARCHEQUITY RESEARCH May 18, 2010

Ranbaxy Laboratories Ltd HoldRESULTS REVIEWAstonishing results, but uncertainties remainShare Data

In Q110, Ranbaxy Laboratories (Ranbaxy) posted above expectation top lineMarket Cap BSE Sensex Reuters Bloomberg Avg. Volume (52 Week) 0.5 mn 52-Week High/Low Shares Outstanding

Rs. 189.0 bn

number with the consolidated revenues growing by 59.9% yoy to Rs. 24.9 bn 16,875.76 primarily driven by Para-IV exclusivity of Valtrex and settlement income from RANB.BO Flomax. On a standalone basis the Companys revenues shot up 105.5% yoy RBXY IN to Rs. 16.5 bn. Though the Company posted robust performance during theRs. 449.50 Rs. 538 / 208.15

Price

quarter due to improvement across geographies and favourable currency, the continued uncertainty over the timing of the resolution of USFDA issues will420 mn

remain a concern in the near term. However, we have increased our revenue estimate for CY10 by 390 bps to 9% and upgrade our rating on the stock from(Consolidated) Year to 31 December 2010E 2011E Sell to Hold with a target price of Rs. 460. EPS (Rs.) 16.2 18.1 Robust growth across the board: During the quarter the Company witnessed EPS Growth (%) nm 11.6% broad based growth with strong business performance in the USA (up by 266% PER (x) 27.7x 24.8x

Valuation Ratios

to USD 251 mn) and 10% yoy jump in the revenues from Europe (includingEV/Sales (x) 2.6x 2.3x

Romania). Going forward, we expect Romania to be on the growth trajectory,EV/EBITDA (x) 17.5x 15.6x

following the cost rationalization exercise taken last year and strong growth in the over-the-counter segment. In the domestic market, for project Viraat, theShareholding Pattern (%)

Company has increased the field force and entered into new therapeuticPromoters 63.9

segments, which is likely to result in 15-20% growth in the domestic FIIs 7.6 formulations from H210. Additionally, we expect the Japan market to be one of Institutions 11.6 its key growth drivers in the medium to long term and would develop, Public & Others 16.9 manufacture and supply products to the newly formed company (DaiichiHolding >1% (Non-Promoter)

Sankyo Espha Co. Ltd) by Daiichi Sankyo to market generic products.6.7 Bajaj Alianz Life Insur. Com.Relative Performance

LIC of India

1.6 Uncertainties is likely to remain in the near-term:

On the US Food and Drug Administration (USFDA) issue the Company is still waiting inspection of the Dewas facility, while the corrective action plan for Pantoa Sahib is under

600

way. However, Ranbaxy continues to remain upbeat on the resolution of issues500

with the USFDA, we remain cautious on the timing of the same.300

400

Key Figures (Standalone)200

Quarterly Data Q1'09 Q4'09 Q1'10 YoY% QoQ%100

(Figures in Rs. mn, except per share data) Net Sales 8,022 15,229 16,485 105.5% 8.2% EBITDA (1,410) 7,787 8,722 nm 12.0%RBXY Rebased BSE Index

Net Profit (9,188) 4,882 8,718 nm 78.6% Margins(%) EBITDA (17.6)% 51.1% 52.9% NPM (114.5)% 32.1% 52.9% Per Share Data (Rs.) EPS (4.1) 9.7 19.8 nm 103.8%

Please see the end of the report for disclaimer and disclosures.

-1-

RANBAXY LABORATORIES LTD RESEARCHEQUITY RESEARCH May 18, 2010 Result Highlights In Q110, the Companys consolidated revenue in USD terms grew by whooping 65% yoy to USD 542 mn and in rupee terms it jumped 59.9% yoy to Rs. 24.9 bn driven by two first to file (FTF; Valtrex and Oxycodone) exclusivities in the USA. The top line growth was also aided by a favourable currency and one-time income from settlement. On standalone basis, revenue advanced 105.5% yoy to Rs. 16.5 bn. During the quarter EBITDA returned to positive at Rs. 8.7 bn from negative Rs. 1.4 bn in Q109, on standalone basis. The net profit stood at Rs. 8.7 bn in Q110 versus a loss of Rs. 9.2 bn in Q109. Other key operational highlights: During Q110, sales in emerging markets were USD 212 mn, a growth of 15%, and contributed 39% to sales. Sales in North America were USD 264 mn (Rs. 12.1 bn), a growth of 222%. USA recorded sales of USD 251 mn (Rs. 11.5 bn), exhibiting buoyant growth of 266%, primarily driven by FTF sales. Europe recorded sales of USD 67 mn (Rs. 3.1 bn), a growth of 10%. Sales in Romania showed a recovery during the quarter, and grew by 14%. The domestic pharmaceuticals business recorded sales of Rs. 3.5 bn (USD 75 mn), a growth of 6% in rupee terms. Excluding a large government tender in Q109, the growth was 15%. Sales in the Consumer Healthcare business were at Rs. 436 mn (USD 10 mn), a growth of 50%. Asia Pacific recorded sales of USD 14 mn (Rs. 662 mn), a de-growth of 38%, primarily due to divestment of certain businesses in Vietnam and China in FY09. Sales in the CIS region recovered well to USD 24 mn (Rs. 1.1 bn), a growth of 26%. In the USA, Valacyclovir, an FTF product launched in Q409, has achieved a market share of over 60%. The Company also launched an authorised generic of Oxycodone ER tablets, during the quarter.

-2- Indiabulls (H.O.), Plot No- 448-451, Udyog Vihar, Phase - V, Gurgaon - 122 001, Haryana. Ph: (0124) 3989555, 3989666

RANBAXY LABORATORIES LTD RESEARCHEQUITY RESEARCH May 18, 2010 During the quarter, the Company made 43 filings and received 45 approvals for dosage forms. For APIs, a total of 34 filings were made, and 33 approvals were received.Key Figures (Consolidated) Year to December CY07 CY08 CY09 CY10E CY11E CAGR (%) (Figures in Rs. mn, except per share data) (CY09-11E) Net Sales 66,480 72,41 4 75,970 82,808 91,917 10.0% EBITDA 9,251 2,39 6 9,056 12,224 13,637 22.7% Adjusted net Profit 7,319 (7,48 8) 2,965 6,822 7,612 60.2% EBITDA Margin 13.9% 3.3 % 11.9% 14.8% 14.8% NPM 11.0% (10.3)% 3.9% 8.2% 8.3% Per Share Data (Rs.) EPS 18.3 (19.6) 4.6 16.2 18.1 98.4% PER (x) 23.3x nm 97 .7x 27.7x 24.8x

Valuation Factoring the better than expected Q110 results and recent successful launch of two FTFs, we have upgraded our top line growth estimate for CY10 by 390 bps. Moreover, our DCF based valuation (assuming a 14.3% WACC and a 5% terminal growth rate) gives a target price of Rs. 460, which provides a marginal upside of 2% over the current market price of Rs. 449.50. Hence, we upgrade our rating on the stock from Sell to Hold.

Cost of Capital 459.60 12.5% 13.0% 14.3% 13.5% 14.0% 4.0% 567 523 428 484 449 4.5% 593 545 443 503 466 623 571 460 525 484 5.5% 657 599 478 549 505 6.0% 696 631 499 576 528

5.0%

-3- Indiabulls (H.O.), Plot No- 448-451, Udyog Vihar, Phase - V, Gurgaon - 122 001, Haryana. Ph: (0124) 3989555, 3989666

RANBAXY LABORATORIES LTD RESEARCHEQUITY RESEARCH May 18, 2010

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-4- Indiabulls (H.O.), Plot No- 448-451, Udyog Vihar, Phase - V, Gurgaon - 122 001, Haryana. Ph: (0124) 3989555, 3989666