Dr Reddy's Laboratories - 4QFY2016 Result Update - Angel Broking

For 4QFY2016, Dr Reddy's Laboratories (DRL) posted results much lower than our estimates. The company posted a 3.0% yoy de-growth in sales to Rs. 3,756cr V/s Rs. 4,500cr expected and V/s Rs. 3,870cr in 4QFY2015. The sales dip mainly happened on account of flat global generics and a 22% dip in the PSAI segment. On the operating front, the EBIT margin came in at 12.7% /s 22.2% expected and V/s 11.4% in 4QFY2015, mainly owing to lower sales and a 15.4% yoy rise in SG&A expenditure. Thus, the Adj. net profit came in at Rs. 376cr V/s Rs. 729cr expected and V/s Rs. 519cr in 4QFY2015, a yoy de-growth of 27.5%. We recommend a Buy rating on the stock.

Sales lower than expected: The company posted a 3.0% yoy de-growth in sales to Rs. 3,756cr V/s Rs. 4,500cr expected and V/s Rs. 3,870cr in 4QFY2015. The sales dip mainly happened owing to flat global generics and a 22% dip in the PSAI segment. In generics, its key market USA posted a 12% yoy growth, Europe posted an 18% yoy dip, while Emerging markets posted a dip of 31% during the quarter. On the operating front, the EBIT margin came in at 12.7% V/s 22.2% expected and V/s 11.4% in 4QFY2015, mainly owing to lower sales and a 15.4% rise in SG&A expenditure. Thus, the Adj. net profit came in at Rs. 376cr V/s Rs. 729cr expected and V/s Rs. 519cr in 4QFY2015, a yoy de-growth of 27.5%. However, on back of the Venezuela related write offs of Rs. 430cr, the reported net profit came in at Rs. 75cr v/s Rs. 519cr in 4QFY2015, a de-growth of 85.6% yoy.

Outlook and valuation: We expect net sales to grow at a CAGR of 13.8% to Rs. 20,021cr and adjusted EPS to record a 12.2% CAGR to Rs. 173.8 over FY2016-18E. 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.3176.65 as compared to the previous close of Rs. 3182.95. The total number of shares traded during the day was 22518 in over 1717 trades.

The stock hit an intraday high of Rs. 3197 and intraday low of 3167.1. The net turnover during the day was Rs. 71512341.

Source : Equity Bulls

Keywords