Maintain 'BUY' on Dr. Reddy's Laboratories – TP increased to Rs.1971 - Geojit BNP Paribas

- Dr Reddy's (DRRD) Q2FY13 numbers beat estimates as Sales came in higher due to higher US volumes for key products, while the stronger EBITDA was due to lower SG&A costs.

- Promotion costs related to OTC products for Russia were deferred to the next quarter, which means SG&A cost is likely to go up in Q3FY13.

- DRRD has generated USD 315 million in H1 out of the targeted USD 800 - 900 million sales in the US. As more clarity is gained on the US pipeline, there could be upside potential to FY13e EPS.

- DRRD has performed very strongly over FY10-FY13, clocking sales CAGR of 14% and sales are estimated, from all geographies, at USD 2.2 billion by the end of FY13.

- With better-than-expected Q2 and visibility of a strong H2 for the US, FY13 EPS estimates have been upgraded by 4%. Due to EPS upgrades target price stands increased to Rs.1971 (from Rs.1803 earlier) over a period of one year, and we maintain Buy on the DRRD stock.

- Key risks to Target Price: Delays in key ANDA approvals from the US FDA and pricing pressure in Russia.

Source : Equity Bulls

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