ICICI Direct recommended hold rating on Dr Reddy's Laboratories with a target price of Rs 3255 in its research report dated January 28, 2019.
ICICI Direct's research report on Dr Reddy's Laboratories
Revenues grew 13.8% YoY to Rs 4397.1 crore, mainly due to strong growth in Europe, Russia, other CIS markets. Domestic revenues grew 13.3% YoY to Rs 763.6 crore. US revenues grew 7.9% YoY to Rs 1599.9 crore. EBITDA margins (excluding impairment charges) expanded 263.4 bps to 23.5% mainly due to lower R&D and employee expenses. EBITDA grew 28.2% YoY to Rs 1031.3 crore. Adjusted PAT grew 56.2% YoY to Rs 781.6 crore. Delta vis-à-vis EBITDA was mainly due to lower tax outgo and interest cost offset by lower other income.
Outlook
Overall, it is still a work in progress for the company with product/segment identification for growth and cost rationalisation drive likely to continue for the next few quarters. We arrive at our target price of Rs 3255 based on 18x FY22E EPS of ~Rs 180.9.
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