Dr. Reddys Laboratories - 1QFY2013 Result Update - Angel Broking

Dr. Reddy's Laboratories (DRL) reported just-in 1QFY2013 top-line performance, while its bottom line came in below expectations. The company's net sales increased by 28.4% yoy, led by 32.0% yoy and 14.0% yoy growth across the global generics and proprietary products businesses, respectively. Management has reinforced its FY2013 guidance of US$2.7bn, with RoCE expected to come in at 25%. We recommend Buy on the stock.

Top line much in line with expectations: DRL reported net sales of Rs.2,541cr for 1QFY2013, registering 28.4% yoy growth, which was higher than our estimate of Rs.2,500cr. The U.S. and ROW were the key growth drivers for the company, registering strong growth of 38.0% yoy and 65.0% yoy, respectively. The domestic market reported a strong growth of 19.0% yoy. The company's EBIT margin expanded by 140bp yoy to 14.6%, resulting in adjusted net profit growing by 28.0% yoy to Rs.336cr during the quarter.

Outlook and valuation: DRL has reinforced its earlier revenue guidance of US$2.7bn by FY2013E with RoCE of 25%. We expect net sales to report a 9.8% CAGR to Rs.11,662cr and adjusted EPS to record a 2.3% CAGR to Rs.92.9 over FY2012-14E. We maintain our Buy on the stock with a target price of Rs.1,859.

Source : Equity Bulls

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