Dr Reddy's Laboratories - Q2FY21 First Cut - ICICI Securities

(CMP - Rs. 5062, MCap - Rs. 84167 crore)

Dr Reddy's Laboratories' Q2FY21 revenues were better than I-direct estimates on all fronts on the back of strong growth in US, Europe and Indian markets and better than expected operational performance.

Q2FY21 Earnings Summary

- Revenues grew 2.0% YoY to Rs. 4911 crore (I-direct estimate: Rs. 4564 crore) mainly due to strong growth in US, Europe and Indian markets partially offset by high base effect in Q2FY20 (divestiture of certain proprietary product brands). The PSAI segment also posted a robust 19.7% YoY growth to Rs. 851 crore (I-Direct estimate: Rs. 817 crore). US revenues grew 28.5% YoY to Rs. 1833 crore (I-Direct estimate: Rs. 1736 crore) on the back of rupee depreciation and new product launches. Domestic revenues grew 21.5% YoY to Rs. 912 crore (I-direct estimate: Rs. 801 crore) due to Wockhardt integration and Covid related products. Europe revenues grew 35.8% YoY to Rs. 375 crore (I-Direct estimate: Rs. 346 crore) due to new launches and currency tailwinds. Russia & Other CIS revenues grew 3.4% YoY to Rs. 600 crore (I-Direct estimate: Rs. 493 crore). ROW sales grew 6.5% YoY to Rs. 264 crore (I-Direct estimate: Rs. 297 crore)

- EBITDA margins expanded 144 bps YoY to 23.5% (I-Direct estimate: 22.7%) due to lower other expenses partially offset by higher raw material and staff costs. Subsequently, EBITDA grew 8.7% YoY to Rs. 1156 crore against I-direct estimate of Rs. 1037 crore

- Net profit de-grew 30.3% YoY to Rs. 772 crore (I-direct estimate: Rs. 608 crore). Delta vis-à-vis EBITDA was mainly due to negative tax in Q2FY20

The management remains committed to working on cost rationalisation, especially on the SGN&A front and calibrating of R&D spend more towards Global Generics front & Biosimilars and lower towards proprietary products. Key growth drivers in the near term would be key launches across geographies besides continuing growth momentum in Global Generics especially in India and Russia.

We would be coming out with a detailed report post interaction with the management.

Shares of DR.REDDY'S LABORATORIES LTD. was last trading in BSE at Rs.4949.8 as compared to the previous close of Rs. 5100.3. The total number of shares traded during the day was 151548 in over 12790 trades.

The stock hit an intraday high of Rs. 5148 and intraday low of 4921.5. The net turnover during the day was Rs. 768034167.

Source : Equity Bulls

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