Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    

| More

Maintain REDUCE on Dr. Reddy's Labs - Strong beat, positives in the price - HDFC Securities

Posted On: 2020-08-01 22:04:43

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

Dr. Reddys' Q1 results beat expectations led by robust growth in PSAI and Europe business along with strong gross margin (56%, +430bps YoY). The growth outlook for PSAI business has improved as customers seek global diversification of supplies, stock higher inventories and look for reliable partners. On the gross margin front, while large part of improvement is likely to sustain, we factor some normalisation (owing to product mix variations and currency) over FY21/22. On the flip side, approval timelines for key products (gNuvaring, gCopaxone) continue to remain uncertain. The company's tax rate has inched up from 22% to 25-27% (discontinuation of R&D deduction benefits and tax holiday on one of the plant). We increase our EPS estimates for FY21/22 by 11%/4% to factor the above. The stock trades at 27x/22x FY21/22 EPS which leaves limited room for execution miss. We maintain Reduce rating with a revised TP of Rs3,940 based on 20x FY22 EPS.

All round beat: Revenues grew at 15% YoY at Rs44.1bn as strong growth in PSAI (+88% YoY, new launches, currency benefit, higher volumes), Emerging markets (+54% YoY, China, Vietnam led), Europe (+ 48% YoY, new launches, currency benefits) offset weakness in India (-10% YoY) and Russia (-9% YoY) due to Covid. EBIDTA margins improved to 25.5% (+576bps YoY, +386bps QoQ) largely on back of higher gross margins (56%, +437bps YoY, +457 QoQ, currency, product mix, productivity).

50%+ US growth hinges on two key product approvals: We forecast the US business to register 12% revenue CAGR over FY20-22e. More than 50% of the growth in this period is dependent on two assets - gNuvaring and gCopaxone. The CRL for gCopaxone is filed and for gNuvaring is delayed by few months. We factor gCopaxone launch in 2HFY21 and gNuvaring in Q4FY21. Any delay in approval/launch timelines will impact our estimates.

Key call takeaways: a) Price erosion in US - more stable; b) gRevlimid - no visibility on trial date yet; c) India - absolute EBITDA contribution has been stable, Wockhardt business is complementary to existing portfolio; d) Net debt: Rs3.3bn, ETR at 34%; e) Guidance: Capex: Rs10bn in FY21, Tax rate - 25-27%; f) M&A opportunities - Emerging markets particularly India.

Shares of DR.REDDY'S LABORATORIES LTD. was last trading in BSE at Rs.4532.5 as compared to the previous close of Rs. 4516.15. The total number of shares traded during the day was 53683 in over 5456 trades.

The stock hit an intraday high of Rs. 4551.6 and intraday low of 4460. The net turnover during the day was Rs. 242259389.

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:

HeidelbergCement India - Play on better priced Central India; initiate with BUY - ICICI Securities

Healthcare - Diagnostics: Multiple tailwinds likely to emerge - ICICI Securities

Mazagon Dock Shipbuilders Ltd - IPO Review - ICICI Securities

Persistent Systems - 28th September 2020 - Angel Broking

Canara Bank - 28th September 2020 - Angel Broking

Subscribe to UTI Asset Management Company Limited - IPO Note - Angel Broking

Multiplex Sector - Mr. Jyoti Roy - DVP - Equity Strategist, Angel Broking Ltd

Sale of Sequent stake to Strides Pharma - Angel Broking

Subscribe to Mazagon Dock Shipbuilders Ltd - IPO Note - Angel Broking

JSW Energy - First big renewable step - ICICI Securities

V-MART Retail - Best play in value fashion segment; initiating with BUY - ICICI Securities

Gas sector - New winners and losers likely on policy changes in gas sector - ICICI Securities

Mazagon Dock Shipbuilders Limited - IPO Note - Geojit

UTI Asset Management Company Limited - IPO Note - Geojit

Preview on RBI Monetary Policy - Oct 2020 - Shanti Ekambaram

Rollover Report for September 2020 - October 2020: Angel Broking

Covid Recovery Pulse - Sep 25, 2020 - ICICI Securities

Quick Comment - Suven Pharmaceuticals - ICICI Securities

Derivatives Strategy - Sep 25, 2020 - Positional Option - ICICI Securities

Gladiator Stocks - Ramco Cement - ICICI Securities

IPO Review - UTI Asset Management Company - ICICI Securities

Stock of the Day - Zensar Technologies - Sep 25, 2020 - Angel Broking

Accenture Q4FY2020 Result - Angel Broking

Granules India receives ANDA approval - Angel Broking

Zydus Cadila receives US FDA approval - Angel Broking

Cipla - ANDA approval - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

Mindspace REIT - Mr. Yash Gupta - Equity Research Associate, Angel Broking Ltd

UTI AMC - IPO - Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

Balkrishna Industries - Growth momentum continues - ICICI Securities

Rollover Analysis (September 25): Nifty starts October series with low OI amid high volatility

Derivatives View (September 25): Sell Bank Nifty in range of 20650-20750 - ICICI Securities

Rollover Analysis - Sept 20: Selling climax on expiry as markets crumble - YES Securities

Zydus Wellness - Leadership in niche categories; initiate at BUY - ICICI Securities

Power - Setting the stage - ICICI Securities

Company Update - Elgi Equipments - ICICI Securities

Nano Nivesh - The Anup Engineering - ICICI Securities

RBI OMO announcement of Rs. 10000 crore - Angel Broking

TCS deal win - Sep 24, 2020 - Angel Broking

View on Pre-Monetary Policy by Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank

US FDA approval to Zydus Cadila - Angel Broking

HDFC Securities Institutional Research Desk: Cement Sector Thematic - Spotting the sweet spot

Bharat Forge - Expectation hurdle remains steep - ICICI Securities


Mutual Fund Review - September, 2020 - ICICI Securities

UTI AMC announces IPO date - Angel Broking

Asian Paints - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Britannia Industries - Mr. Amarjeet Maurya - AVP - Mid Caps, Angel Broking Ltd

Hexaware Technologies (Not Rated): Hexaware accepts 475/share as final delisting price - ICICI Securities

CAMS IPO - Day 2 Subscription - Angel Boking

Chemcon Speciality Chemicals - IPO subscribed 12.62 times on second day - Angel Broking

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

disclaimer copyright © 2005 - 2019