Earnings Update - Dr Reddy's Laboratories (DRRD IN) - High competition & continued pricing pressure hammered global sales - CSEC Research

High competition & continued pricing pressure hammered global sales

- Dr. Reddy's Laboratories (DRL) posted a decline of 4.8% YoY in net sales to INR 36.1bn for the quarter. Revenues from Global Generic (GG) segment contracted 5% YoY to INR 29.1 bn, primarily on the back of lower contribution from North America and Emerging markets. Pharmaceutical Services and Active Ingredients (PSAI) segment revenue fell by 6% YoY to INR 5.4 bn due to regulatory issues and ongoing remediation measures.

- In the GG segment, revenue from North America contracted 19% YoY to INR 15.3bn for the quarter mainly due to increased competition in valgancyclovir and Azacitidine, coupled with pricing pressure and discontinuation of McNeil business.

- Emerging markets posted a 7% YoY de-growth to INR 5.9bn on account of constrained operations in Venezuela.

Valuation: At the CMP, the stock is trading at 22.7x FY2018E and 17.4x FY2019E consensus EPS respectively. We maintain Marketperformer rating with a Target price of INR 2,862 based on 18x FY2019E consensus EPS.

Risks: Regulatory issues.

Shares of DR.REDDY'S LABORATORIES LTD. was last trading in BSE at Rs.2656.05 as compared to the previous close of Rs. 2678.35. The total number of shares traded during the day was 17586 in over 1430 trades.

The stock hit an intraday high of Rs. 2691.45 and intraday low of 2640.5. The net turnover during the day was Rs. 46775898.

Source : Equity Bulls

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