Buy Ranbaxy Laboratories

Ranbaxy Laboratories Cluster: Apple GreenRecommendation: BuyPrice target: Under reviewCurrent market price: Rs598
Ranbaxy settles with Pfizer on Lipitor
Key points
Ranbaxy Laboratories (Ranbaxy) has reached an out-of-court settlement with Pfizer, Inc (Pfizer) on Lipitor. Lipitor is the world's best selling drug, with global sales of $12.7 billion annually. Ranbaxy and Pfizer have been fighting on Lipitor since six years in 12-15 markets across the world.
As per the agreement, Ranbaxy can launch generic Lipitor and generic Caduet in the USA with a 180-day marketing exclusivity in November 2011 and on varying dates prior to the patent expiry in seven other markets including Canada, Australia, Belgium, Germany, Sweden, Italy and the Netherlands.
All the pending lawsuits between Ranbaxy and Pfizer relating to Lipitor in these selected markets have been dismissed. In addition, the pending patent litigation between Ranbaxy and Pfizer on Caduet will be dismissed in the USA.
The agreement provides visibility and clarity to Ranbaxy's impeding launch of generic Lipitor in the USA and provides it with an early entry in other world markets. The termination of all pending litigation related to Lipitor would also benefit Ranbaxy in terms of reduced litigation costs.
We believe Ranbaxy will be able to garner collective revenues and profits of ~$1.5 billion and $880 million respectively from the launch of Lipitor in various markets at pre-determined dates and from the launch of Caduet in the USA. This would translate into an incremental upside of Rs25-30 per share from Ranbaxy (after excluding the earlier NPV of Rs35 per share for Lipitor, which has already been discounted in the stock price).
VIEWPOINT
Dish TV India
Concerns galoreDish TV stock has been a big underperformer over the last year and we believe it was so for right reasons. The direct to home (DTH) opportunity in India is big with the subscriber base expected to increase rapidly from 3.5 million in December 2007 to 25 million by 2012 registering a compounded annual growth rate (CAGR) of 48% over the period. However, we believe, only players with deep pockets are likely to gain and survive over longer term.