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Dr Reddy's Laboratories - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-08-01 22:10:02

Revenues grew 14.7% YoY to Rs. 4426 crore (I-direct estimate: Rs. 4305 crore) mainly due to strong growth in Europe (up 47.7% YoY) and RoW markets (up 56.6% YoY) partly offset by 10.1% YoY fall in domestic sales to Rs. 626 crore. PSAI segment also posted robust 88.4% YoY growth to Rs. 855 crore. US revenues grew 5.9% YoY to Rs. 1728 crore due to rupee depreciation. EBITDA margins expanded 611 bps YoY to 25.3% due to a better overall operational performance. Subsequently, EBITDA grew 51.2% YoY to Rs. 1121 crore. Net profit de-grew 12.1% YoY to Rs. 595 crore. Delta vis--vis EBITDA was mainly due to higher tax rate and higher other income in Q1FY20.

Valuation & Outlook

Despite subpar performances in key trinity of US/India/Russia, which was not entirely unexpected, the company begun FY21 on a strong note, thanks to robust performances in other segments and sustained focus on cost rationalisation, especially on SGN&A front and R&D spend. We draw comfort from the management commentary, especially their endeavour to focus on simultaneous launches across geographies and segments besides realignment of R&D spend towards - Global Generics, Biosimilars and PSAI segment. We believe this is a welcome change from the earlier stance of overemphasis on a particular market (read US). Strong FCF generation and healthy balance sheet are some legacy strongholds for the company. We believe the efforts taken in the last few quarters are sustainable and should support stable performances, going ahead. We maintain BUY and arrive at a target price of Rs. 5000 based on 25x FY22E EPS of ~Rs. 200.

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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

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