Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  

| More

Maintain ADD on Dr. Reddy's Labs - Good quarter, lower SG&A cost is encouraging - HDFC Securities

Posted On: 2020-10-29 05:49:33

Ms. Bansi Desai,, Institutional Research Analyst, HDFC Securities

Dr. Reddys' Q2 Rev/PAT beat estimates by 4%/20% driven by strong growth across markets and lower tax rate. Tight control on SG&A cost (-208bps QoQ) is noteworthy given sequential increase in marketing spends and integration of Wockhardt portfolio in the quarter. The business outlook remains strong with multiple triggers such as upsides from Covid portfolio (Sputnik V vaccine, Favipiravir trial in US) and complex approvals/launches in the US (gVascepa, Copaxone, gNuvaring); however, launch timelines for these remain uncertain. We expect core business performance to remain strong aided by structural tailwinds in API business, strong launch momentum in US, traction in EU business and ramp-up in Wockhardt portfolio. Our estimates largely remain unchanged and we marginally increase our TP to Rs5,390 (from Rs5,375 earlier). Maintain ADD.

Strong traction across markets: Revenues grew by 20% YoY led by strong growth in India (+21% YoY, Wockhardt integration, Covid drugs), PSAI (+20% YoY, services biz, currency gains), Europe (+36% YoY, new launches, currency gains) and US (+6% QoQ, new launches). EBIDTA margins were steady at 25.2% (-21bps QoQ) as lower gross margins (-211 QoQ, lower export incentive, product mix, forex) were offset by lower SG&A cost (-208bps, productivity gains). Adjusting for one offs, PAT came at Rs8.4bn aided by lower tax rate (11%, DTA led).

US pipeline holds promise: Limited competition products in pipeline such as gKuvan (TA in place), gVascepa (preparing for launch), gNuvaring and gCopaxone (uncertain timelines) add longer term growth visibility to the US business. US pipeline consist of 92 pending ANDA (50 Para IVs, 26 FTFs). This, along with strong launch momentum (30+ launches in FY21) will drive 15% revenue CAGR over FY20-23e.

Key call takeaways: a) gVascepa - launch timelines not disclosed; b) Sputnik V - approval is contingent on outcome of global trials, Phase 3 trial in India (1,400 patients) to end by May 21, plans 100mn doses in a phased manner; c) Wockhardt integration - progressing well; d) Net debt: Rs1.4bn, ETR at 25% for FY21; e) Rituximab - Phase 3 trial progressing well; f) M&A opportunities - will continue to evaluate.

Valuation and risks: We maintain ADD rating and increase our SOTP based target price to Rs 5,390. Our target price is based on 22x Sep 22 EPS and NPV of Rs384/share for gRevlimid. Key risks: delay in key approvals; higher price erosion in the US; adverse outcome on drug price fixing lawsuit in US; and delay in turnaround of Wockhardt portfolio.

Shares of DR.REDDY's LABORATORIES LTD. was last trading in BSE at Rs.4942.45 as compared to the previous close of Rs. 4949.8. The total number of shares traded during the day was 47875 in over 5865 trades.

The stock hit an intraday high of Rs. 5041.6 and intraday low of 4892.8. The net turnover during the day was Rs. 238162680.

Source: Equity Bulls

Click here to send ur comments or to

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only., its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.

Other Headlines:

Engineers India - Consultancy segment outperformance - ICICI Securities

Engineers India - Q2 FY21 Result Update - YES SECURITIES

Motherson Sumi Systems - Company Update - Virtual Investor Conference - ICICI Direct

Mutual Fund Review - November, 2020 - ICICI Direct

Sadbhav Engineering - Q2FY21 Company Update - ICICI Direct

IRB Infrastructure - Q2FY21 Company Update - ICICI Direct

Vodafone Idea fund raising - Angel Broking

Rupee - Nov 23, 2020 - Reliance Securities

Crude Oil - Nov 23, 2020 - Reliance Securities

Q2FY21 Bank Result Quick Review - Angel Broking

Banks & NBFC's Sector Update Report - Yet another watershed moment? - HDFC Securities

Galaxy Surfactants - EBITDA/kg has an upside risk - ICICI Securities

Diagnostics - COVID-19 tests continue to trend higher - ICICI Securities

Banking & Financial Services - Sector Update - Nov 22, 2020 - ICICI Direct

Dalmia Bharat Sugar - Q2FY21 Company Update - ICICI Direct

Balkrishna Industries - Industry export growth momentum continues - ICICI Securities

Covid Recovery Pulse - Festive positivity continues in auto retails, E-way bill generation improves... - ICICI Direct

Quant Pick - Exide Industries - ICICI Direct

Shankara Building Products - Q2FY21 Company Update - ICICI Direct

Triveni Engineering - Q2FY21 Company Update - ICICI Direct

Initiating Coverage on Sudarshan Chemical - Leaping into the league of giants - HDFC Securities

Earnings Wrap Q2FY21: Earnings outperform, post Covid recovery picks up steam - ICICI Direct

Vodafone Idea Positive development beneficial for IDFC first bank - Angel Broking

Lakshmi Vilas Bank - Angel Broking

WIPRO Buyback record date announcement - Angel Broking

TCS buyback record date announcement - Angel Broking

Banks Sector Update - Collection efficiency - a positive surprise! - HDFC Securities

Quant Pick - Max Financial Services - ICICI Direct

Graphite India - Q2FY21 Result Update - ICICI Direct

Gladiator Stocks - Maruti Suzuki India - ICICI Direct

Exide Industries - Q2FY21 Result Update - ICICI Direct

Mishra Dhatu Nigam - Execution outlook remains strong - ICICI Securities

Bharat Electronics - Diversifying into multiple revenue streams - ICICI Securities

Wipro Ltd - Virtual Analyst Meet Update - ICICI Direct

Avadh Sugar & Energy - November 2020 - Company Update - ICICI Direct

Mahindra Lifespace Developers - H1FY21 Company Update - ICICI Direct

Quant Pick - Godrej Consumer Products - ICICI Direct

India Equity Strategy Report - Quarterly flipbook - HDFC Securities

Maintain REDUCE on Jubilant FoodWorks - Recovery continues; priced-in - HDFC Securities

Maintain BUY on Ahluwalia Contracts - Q2FY21 - Significant beat on execution - HDFC Securities

Repco Home Finance Limited - Q2 FY21 Result Update - YES Securities

JK Lakshmi Cement - Target upgrade - Angel Broking

BUY on Petronet LNG - Stellar quarter - HDFC Securities

Maintain BUY on Prestige Estates Projects - Capex cycle to gather pace - HDFC Securities

REDUCE on LIC Housing Finance - Tread with caution - HDFC Securities

SELL on New India Assurance - High claims ratio dents profits - HDFC Securities

New orders for L&T - Angel Broking

Cipla - Multi-G agreement - Angel Broing

REDUCE on Eicher Motors - 'Meteor' to drive sales; valuations remain expensive - HDFC Securities

BUY on Galaxy Surfactants - Highest volumes in a quarter - HDFC Securities

Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2019