Dr. Reddy's Laboratories Ltd. share price target

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)

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%.