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Research
Dr Reddys Laboratories - 2QFY2016 Result Update - Angel Broking
Posted On : 2015-11-17 10:42:25( TIMEZONE : IST )
For 2QFY2016, Dr Reddy's Laboratories (DRL) posted in line sales while the net profit growth exceeded our estimates. The company posted an 11.2% yoy growth in sales to Rs. 3,989cr V/s Rs. 4,000cr expected and V/s Rs. 3,588cr in 2QFY2015, mainly driven by global generics. On the operating front, the EBIT margin came in at 22.4% V/s 18.7% expected and V/s 17.3% in 2QFY2015, driven by the expansion in gross margins (285bps) and SG&A and R&D expenditure growing only moderaly, which is by 3.6% and 8.8% yoy, respectively. Thus, the net profit came in at Rs. 722cr V/s Rs. 631cr expected and V/s Rs. 574cr in 2QFY2015, a yoy growth of 25.7%. After the warning letters for its three facilities, the stock has corrected, making valuations attractive. Thus we recommend a Buy rating on the stock.
Results better on operating front: The company posted an 11.2% growth in sales to Rs. 3989cr V/s Rs. 4,000cr expected and V/s Rs. 3,588cr in 2QFY2015, mainly driven by global generics. Global generics (Rs. 3,276.8cr) posted a growth of 15% yoy, while PSAI (Rs. 591.8cr) posted a dip of 7% yoy. In global generics, the key markets-USA, Europe, India and Emerging markets, posted a growth of 32%, 65%, 14% and -22% yoy, respectively. On the operating front, the EBIT margin came in at 22.4% V/s 18.7% expected and V/s 17.3% in 2QFY2015, driven by expansion in gross margins (285bps) and moderate growth in SG&A and R&D expenditure, which rose by 3.6% and 8.8% yoy, respectively. Thus, the net profit came in at Rs. 722cr V/s Rs. 631cr expected and V/s Rs. 574cr in 2QFY2015, a yoy growth of 25.7%.
Outlook and valuation: We expect net sales to grow at a CAGR of 14.9% to Rs. 19,575cr and adjusted EPS to record a 17.2% CAGR to Rs. 178.8 over FY2015-17E. On back of valuations, we recommend a Buy rating on the stock.
Shares of DR.REDDY'S LABORATORIES LTD. was last trading in BSE at Rs.3440 as compared to the previous close of Rs. 3500.5. The total number of shares traded during the day was 117691 in over 6294 trades.
The stock hit an intraday high of Rs. 3470.9 and intraday low of 3412. The net turnover during the day was Rs. 404931000.
