Dr. Reddy's Laboratories Ltd. share price target

Dr Reddy's Laboratories has reported a healthy 65 percent year on year growth in third quarter profit to Rs 500 crore on a low base and good operating income. Profit in same period last year stood at Rs 302.7 crore. Total Income increased 1 percent year-on-year to Rs 3,864 crore in quarter ended December 2018 as the growth in India, Europe and Emerging Markets offset by...

Q3FY19 results were higher than I-direct estimates on profitability front while revenues were lower mainly due to lower US sales. Revenues were muted at | 3864.6 crore (I-direct estimate: | 4015 crore). Growth of 10% in domestic market to | 674.1 crore (I-direct estimate: | 674 crore) and 25.0% YoY growth in Russia & CIS to | 550 crore (I-direct estimate: | 550 crore) were largely offset by 7.7% fall in US sales to | 1483.2 crore (I-direct estimate: | 1600 crore) EBITDA margins remained at 20.8% YoY but came in 212 bps higher...

DRL's revenue, increased by 1.2% YoY to Rs 38.5 bn, is higher than our estimates of Rs 37.7 bn; primarily due to good growth in India and Emerging market business.

We model 13/37% rev./earnings CAGR (FY18-21E) and re-iterate BUY with a TP of Rs 3,260 (20x Dec-20E EPS + Rs 380 for niche products). Ramp up in emerging markets (up 31% YoY), cost control measures, lower R&D; (9.5% of sales), tax benefits (17% tax rate) and one off gain from sale of API unit (Rs 423mn) led to a 30% beat on our PAT estimates; which was up 45% YoY to Rs 4.8bn. Adjusting for the one-off income, it grew 36% YoY. Despite weaker US sales (down 8% YoY), the operational performance was in-line with our expectation as EBITDA margin improved to 21.2%. Even at normalized R&D;, it would have been above 20%.

US business declines, margins outperform: DRL's revenues increased by 7% YoY to Rs 37.9 bn (lower than our estimates of Rs 38.9 bn) primarily due to de-growth in US business on account of higher pricing pressure due to incremental competition in some of the key products.

Operating profit margins fell by 108 bps YoY to 19.89% and the operating profit went up by rights relating to Cloderm brand (including its authorised generic) and profit on sale of antibiotic manufacturing facility in Bristol, US....

Revenues, EBITDA were broadly in line while net profit was higher mainly due to lower tax rate and higher other income. Adjusted for these, net profit was also almost in line with our estimates Revenues grew 7.2% YoY to | 3817.5 crore (I-direct estimate: | 3857.7 crore) as 26.8% YoY growth in Russia & other CIS to | 520 crore and 63.7% YoY growth in RoW sales to | 229.2 crore were largely offset by muted growth in the US to | 1426.5 crore EBITDA margins improved 109 bps to 19.9% (I-direct estimate:...

US business declines, margins outperform: DRL's revenues increased by 7% YoY to Rs 37.9 bn (lower than our estimates of Rs 38.9 bn) primarily due to de-growth in US business on account of higher pricing pressure due to incremental competition in some of the key products.

Re-iterate BUY with a TP of Rs 2,825 (18x Sep '20E EPS +Rs 520 for niche products). Despite witnessing steep QoQ fall (-18%) in the US dollar revenues (~US 197mn), Dr Reddys Lab (DRRD) reported in-line result in 2QFY19. Revenues were up 7% YoY/2% QoQ to Rs 38bn, EBITDA margin came in at 19.5% was up 75bps and PAT at Rs 5bn grew 77% YoY and 10% QoQ. Revenue growth was largely led by the branded generic markets like Russia, CIS and RoW. Improved profitability was primarily contributed by favorable business mix and currency fall in 2QFY19.