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Dr Reddy’s Laboratories 3QFY2014 performance highlights and results update

February 13, 2014, Thursday, 05:27 GMT | 00:27 EST | 09:57 IST | 12:27 SGT
Contributed by Angel Broking


Dr Reddy’s Laboratories (DRL)’s results were broadly in line with our estimates on sales, while the net profit came in lower inspite of higher than expected OPM. Sales came in at Rs.3,534cr (vs an expected Rs.3,588cr), posting a growth of 22.7% yoy. The OPM, at 27.6%, came in ahead of our expectation of 25.4%, and higher than 20.4% in the corresponding period of the previous year. A higher tax provision during the quarter, the company had reversal of the impairment charge on intangible assets amounting to Rs.49.7cr; accounting for the same, the adjusted net profit came in at Rs.584cr, a yoy growth of 54.3%. We maintain Accumulate on the stock with a price target of Rs.3,008.
 
Results better than expectations on OPM front : Dr Reddy’s results were broadly in line with our estimates on sales front. Sales came in at Rs.3,534cr (vs an expected Rs.3,588cr), posting a yoy growth of 22.7%. The sales growth during the quarter was aided by global generic sales, which posted a growth of 41% yoy, mainly driven by the US and emerging markets, which posted a yoy growth of 76% and 25% respectively. The OPM, at 27.6%, came in ahead of our expectation of 25.4%, and higher than 20.4% in the corresponding period of the previous year. However, a higher tax provision during the quarter, led the reported net profit to come in at Rs.618cr, a yoy growth of 63.5% over the corresponding period of last year. Also, during the quarter, the company had reversal of the impairment charge on intangible assets amounting to Rs.49.7cr; accounting for the same, the adjusted net profit came in at Rs.584cr, a yoy growth of 54.3% (vs our expectation of Rs.736cr).
 
Outlook and valuation: We expect net sales to report a 15.8% CAGR to Rs.15,590cr and adjusted EPS to record a 25.2% CAGR to Rs.161.6 over FY2013-15. We recommend Accumulate on the stock.