Dr. Reddy's Laboratories Ltd. share price target

Dr. Reddys Lab (DRL) revenue, increased by 3.3% YoY to Rs 38.4 bn, is lower than our estimates of Rs 41.2 bn; primarily due to good growth in Domestic, Europe and Emerging market business.

DRRD sales were in line with our estimates while adj. EBITDA and adj. PAT Change in Estimates | Target | Reco missed estimates due to significantly lower PSAI sales, one-off inventory adjustment and price erosion in key generics. Management however...

Q1 reported 18% EBITDA miss impacted by one-offs in gross margins (PSAI & inventory write-offs in US totaling US$20mn, in my view), while adj. EBITDA was in line.

Dr. Reddy's Lab. (DRRD) demonstrated mixed performance in Q4FY19, with revenue stood at Rs 4,017cr (vs. estimate of Rs 3,840cr), beat was on the back of one-time revenue realized from the sale of derma brands of Rs180cr.

US going through rough patch but promising launches ahead Despite challenging years, the US remains a key driver for the company, contributing ~42% to total revenues. The company has strong pending pipeline comprises 110 (60 Para IV filings and 43 FTFs) including three NDAs under 505 (b)(2) route. We expect US sales to grow at a CAGR of 10% to...

Dr. Reddys Lab's (DRL) revenue, increased by 13.6% YoY to Rs40.2 bn, ishigher than our estimates of Rs 38.9bn; primarily due to good growth inEurope and Emerging market business.

Coming out of a regulatory debacle and two years of dismal operational performance, DRRD ended the year with 8/40/77% revenue/EBITDA/PAT growth respectively. With a sharp focus on cost optimization, weeding out of non-profitable businesses, largely clean regulatory slate, improving balance sheet and a major US revival, we remain constructive on DRRD. We believe it will be the best performing pharma stock in FY20E. To our surprise, DRRD is also catching up fast on biosimilar filings for developed markets (bNeulasta expected in 1HFY20). China ramp up remains another interesting opportunity. Overall, we expect 16/22/18% revenue/EBITDA/PAT CAGR over FY19-21E. At 22/19x FY20/21E EPS, the valuations remain attractive as compared to peers. We maintain BUY on DRRD despite a miss on our estimates (on account of certain one-offs). Our TP is revised to Rs 3,320/sh (20x FY21E EPS + Rs 380/sh for niche products). The focus on cost optimization and a revival in the US biz are key to our thesis.

DRRD's sales and adj. EBITDA are in line with our estimates while adj. PAT was a miss in our estimates by 11% due to low other income and high tax outgo (rate). While its gross margin declined by 90bps QoQ, its rationalized overhead costs (SGA and R&D;) cited benefits of organizational restructure in the recent past. SGA overhead increased by only 4%, while R&D; costs were flat QoQ. Management maintains its guidance of focus on productivity, rationalized product portfolio, new products and foraying new markets in FY20E and FY21E. Also, EBITDA margin decreased by 50bps QoQ due to...

revenue is up 8.5% YoY to INR38.4b. The overall growth was dragged to some extent by 3% YoY growth in US sales (INR15b) and moderate 6%/8% YoY growth in domestic/PSAI sales to INR6.5b/INR6.8b Inferior product mix and manufacturing overheads impact profitability: Adjusting for the one-time sale of its derma brands, gross margin (GM) declined ~330bp YoY (-90bp QoQ) to 50.2%, primarily due to competition in key products, higher manufacturing overheads, impact of inventory management and adverse currency movement. Although GM contracted,...

DRRD reported in-line numbers with revenues of Rs 3850 crs (vs estimate of Rs3867crs), EBITDA Rs816crs (vs estimate of Rs 770 crs) and PAT Rs478crs (estimate Rs401crs). Healthy operating performance was led by (a) Steady revenue growth in the domestic formulation business (up 10% YoY)