For 2QFY2016, Dr Reddys Laboratories (DRL) posted in line sales while the net profit growth exceeded our estimates. The company posted an 11.2% yoy growth in sales to Rs3,989cr V/s Rs4,000cr expected and V/s Rs3,588cr in 2QFY2015, mainly driven by global generics. On the operating front, the EBIT margin came in at 22.4% V/s 18.7% expected and V/s 17.3% in 2QFY2015, driven by the expansion in gross margins (285bps) and SG&A; and R&D; expenditure growing only moderaly, which is by 3.6% and 8.8% yoy, respectively. Thus, the net profit came in at Rs722cr V/s Rs631cr expected and V/s Rs574cr in 2QFY2015, a yoy growth of 25.7%. After the warning letters for its three facilities, the stock has corrected, making valuations attractive. Thus we recommend a Buy rating on the stock. Results better on operating front: The company posted an 11.2% growth in sales to Rs3989cr V/s Rs4,000cr expected and V/s Rs3,588cr in 2QFY2015, mainly driven by global generics. Global generics (Rs3,276.8cr) posted a growth of 15% yoy, while PSAI (Rs591.8cr) posted a dip of 7% yoy. In global generics, the key markets- USA, Europe, India and Emerging markets, posted a growth of 32%, 65%, 14% and -22% yoy, respectively. On...