Dr. Reddy's Lab - US biz and margins disappointed- Maintain Buy - Emkay

- Q3FY13 Results, below expectations - Adjusted for one-offs last year a) Revenues at Rs28.6bn (up 26%YoY), b) EBITDA at Rs5.7bn (up 31% YoY) and c) APAT at Rs3.6bn (up 58% YoY)

- US revenue declined QoQ to USD 178mn vs USD 188mn in Q2'13 on back of increased competition and no new launch. Revenue in Russia biz grew 26% and India biz by 12%

- Gross margins contracted 100bps QoQ to 56% on back of lower gross margins in PSAI biz at 22% vs 35% in Q2'13. This is expected to normalize from next quarter onwards

- Going forward, gain in market share in key products & expected niche launches in US will drive 25% CAGR in earnings over FY12-15. Maintain buy with TP of Rs2,128.

Source : Equity Bulls

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