Q3FY21 Result Update - Dr Reddy's Laboratories - ICICI Direct

Q3 revenues grew 12.4% YoY to Rs. 4942 crore (I-direct estimate: Rs. 5014 crore). Domestic revenues grew 25.6% YoY to Rs. 959 crore due to Wockhardt integration and new product launches. Europe revenues grew 33.9% YoY to Rs. 414 crore due to new launches. US revenues grew 8.7% YoY to Rs. 1739 crore on the back of new product launches, favourable forex rate partly offset by price erosion. Adjusting for impairment charge of Rs. 597.2 crore in Q3FY21, Rs. 1320 crore in Q3FY20, EBITDA margins were down 46 bps YoY at 23.0% (I-direct estimate: 23.4%) due to lower gross margins amid price erosion, higher freight charges. Hence, EBITDA grew 10.2% YoY to Rs. 1136 crore vs. I-direct estimate of Rs. 1172 crore. Adjusted PAT grew 7.2% YoY to Rs. 685 crore.

Valuation & Outlook

Adjusting for one-time impairment charges taken in Q3, results were in line with I-direct estimates on all fronts. We draw comfort from the management's sustained focus on cost rationalisation, especially on SGN&A front and endeavour to focus on simultaneous launches across geographies and segments besides realignment of R&D spend towards - Global Generics, Biosimilars and PSAI segment. We believe this is a welcome change from earlier stance of overemphasis on a particular market (read US). Strong FCF generation, healthy b/s are some legacy strongholds for the company. We believe the efforts taken in the last few quarters are sustainable and should support stable performances, going ahead. We maintain BUY and arrive at a target price of Rs. 5525 (vs. Rs. 5770 earlier), which includes a base business value of ~Rs. 5312 (25x FY23E EPS of Rs. 212.5) + Rs. 213 for NPV of gRevlimid.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_DrReddys_Q3FY21.pdf

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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