Dr Reddy’s Share Price Today: Dr Reddy’s share price fell over 4 per cent to hit an intraday low of Rs 4,055 on NSE despite posting a sharp 108 per cent YoY rise in its Q1FY23 profit after tax — which came in at Rs 1,188 crore — riding on strong growth in its India business.
The revenue for the June quarter was up 6 per cent to Rs 5,215 crore. The company’s India business grew by 26 per cent YoY to Rs 1,333.9 crore. This was driven by the divestment of a few non-core brands, the company said.
M V Ramana, CEO of branded markets (India and emerging markets), said that the company has decided to focus on big brands. Therefore, the company’s focus would be primarily on segments where it has a strong presence like oncology and dermatology.
The pharma major acquired Novartis’ cardiovascular brand Cidmus in April for Rs 456 crore, and is now eyeing good numbers from it. India growth was partially offset a decline in Covid product sales during the June 2022 quarter against Q1FY22. India now contributes 26 per cent to DRL’s revenues.
Commenting on the results, Co-chairman and MD G V Prasad said: “Our underlying business revenues, adjusted for Covid products’ contribution during last year, have grown well. The profit was aided by a few non-recurring incomes, offsetting the near-term headwinds. We continue to improve the health of our core businesses through productivity improvement and a robust product pipeline”.
What should Investors Do?
Dr Reddy’s share price has tumbled more than 15 per cent, underperforming benchmark indices so far in 2022. However, analysts remain bullish and see some potential rally in the stock going forward.
Goldman Sachs has maintained a neutral rating on the stock and cut the target to Rs 4,380 per share after disappointing results, with limited near-term catalysts ahead. It has cut FY24-25 EBITDA estimates by 5-7 percent to factor slower topline/margin development. US business fell 14 percent QoQ as the company experienced increased competition in two key products, reported CNBC-TV18.
Prabhudas Lilladher said that Dr Reddy’s Q1FY23 profitability adjusted for one-time divestment income was weak, impacted by lower GMs and US sales, according to the brokerage. “Our FY24E EPS stands reduced by 4 per cent. We expect margins to improve with the easing of commodities and as revenues scale up with new launches in the US like gRevlimid. India’s revenues were healthy. We estimate margins ex of gRevlimid at 19 per cent and 22 per cent in FY23E and FY24E,” it said. Analysts at Prabhudas Lilladher maintain their ‘buy’ rating on Dr Reddy’s shares with a revised target Price of Rs 4,750 per share, down from Rs 4,900 earlier. Delay in key ANDA approvals and prolonged inflationary environment of raw material prices are key risks to their call.
Analysts at JM Financial are positive on the stock given that Dr Reddy’s US business is gearing up for gRevlimid launch in September this year. The company’s API and EM business are expected to improve sequentially. “We derive comfort from new launches/pipeline, injectable ramp up and 25 per cent margin guidance that will drive growth over the long term,” they said. The brokerage values Dr Reddy’s at 25x FY24E earnings deriving a price target of Rs 5,685 (including gRevlimid of Rs 200). It maintains a ‘buy’ call on the stock and sees up to 33 per cent upside in Dr Reddy’s share price going forward.
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