Dr Reddy's Laboratories - Q3FY21 First Cut - ICICI Direct

(CMP - Rs. 4658, MCap - Rs. 77460 crore)

Adjusting for one-time impairment charges taken in Q3FY21, Dr Reddy's Laboratories' results were in-line with I-direct estimates on all fronts.

Q3FY21 Earnings Summary

- Revenues grew 12.4% YoY to Rs. 4942 crore (I-direct estimate: Rs. 5014 crore) mainly due to strong growth in Europe and Indian markets. Domestic revenues grew 25.6% YoY to Rs. 959 crore (I-direct estimate: Rs. 927 crore) due to Wockhardt integration and new product launches. Europe revenues grew 33.9% YoY to Rs. 414 crore (I-Direct estimate: Rs. 387 crore) due to new launches and currency tailwinds. US revenues grew 8.7% YoY to Rs. 1739 crore (I-Direct estimate: Rs. 1857 crore) on the back of new product launches, higher base business volumes and favourable forex rate partially offset by price erosion. The PSAI segment grew 1.5% YoY to Rs. 701 crore (I-Direct estimate: Rs. 842 crore) with new product launches being offset by lower volume of certain products. Russia & Other CIS revenues de-grew 1.5% YoY to Rs. 660 crore (I-Direct estimate: Rs. 616 crore). ROW sales grew 20.9% YoY to Rs. 302 crore (I-Direct estimate: Rs. 275 crore)

- Adjusting for impairment charge of Rs. 597.2 crore in Q3FY21 and Rs. 1320 crore in Q3FY20, EBITDA margins were down 46 bps YoY at 23.0% (I-direct estimate of 23.4%) due to lower gross margins amid price erosion and lower export benefits along with higher freight charges. Subsequently, EBITDA grew 10.2% YoY to Rs. 1136 crore against I-direct estimate of Rs. 1172 crore. Impairment in Q3FY21 was related to 1) Products: gNuvaRing, gKombiglyze-XR, gQsymia, 2) intangible assets of Global Generics and Proprietary Products segments and 3) PPE write-downs of Global Generics

- Net profit (adjusted for impairment charge) de-grew 20.0% YoY to Rs. 625 crore (I-direct estimate: Rs. 634 crore). Delta vis-a-vis EBITDA was due to non-recognition of deferred tax assets on impairment

The management remains committed to working on cost rationalisation, especially on the SGN&A front and calibrating of R&D spend more towards Global Generics front & Biosimilars and lower towards proprietary products. Key growth drivers in the near term would be key launches across geographies besides continuing growth momentum in Global Generics especially in India and Russia.

We would be coming out with a detailed report post interaction with the management.

Shares of DR.REDDY'S LABORATORIES LTD. was last trading in BSE at Rs.4598.65 as compared to the previous close of Rs. 4876.35. The total number of shares traded during the day was 93752 in over 13165 trades.

The stock hit an intraday high of Rs. 4916.95 and intraday low of 4550. The net turnover during the day was Rs. 442154658.

Source : Equity Bulls

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