Dr Reddy's Laboratories - March 2013 Results Preview - Motilal Oswal

- We expect Dr Reddy's Laboratories (DRRD) to post 12% YoY growth in core revenue (excluding one-off sales) for 4QFY13E at INR25.76b. This would be led by 37.5% YoY growth in core US revenue and 23.4% YoY growth in international branded formulations. PSAI business revenue is likely to decline 5% YoY on a high base.

- Core EBITDA would grow just 7% YoY to INR4.9b impacted by declining profitability in the base business in the US. We expect core EBITDA margin to decline by 100bp YoY.

- Adjusted PAT would be INR2.33b, up 13% YoY -- higher than the growth in EBITDA due to lower depreciation and amortization expenses. Including the contribution from one-off opportunities, we expect PAT to grow 3% YoY to INR3.52b. Traction in the US, branded formulations and PSAI businesses would be the key growth drivers for DRRD for FY13E. Significant gap between guidance and consensus implies some product opportunities in the US but not visible to investors now. Management indicated that it is on track to launch these products in the near term, subject to regulatory approvals. The stock trades at 17.9x FY14E and 15.5x FY15E core earnings. Maintain Buy.

Source : Equity Bulls

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