Dr Reddy's Labs shares jump after Credit Suisse maintains outperform rating, expects earnings momentum to continue

Dr Reddy's Laboratories share price was up over a percent intraday on October 29. The company on October 28 reported a 30.2 percent year-on-year decline in consolidated profit in the September quarter.

The company's consolidated profit declined to Rs 762 crore from Rs 1,092.5 crore in the year-ago period but increased 32 percent sequentially. The YoY decline was higher than CNBC-TV18 poll estimate of Rs 646 crore.

The company had a tax credit of Rs 326.1 crore in year-ago period. The effective tax rate was around 11.6 percent (Rs 99.8 crore tax expenses) for the quarter, which was lower primarily due to recognition of deferred tax assets for one of subsidiaries, said company.

Consolidated revenue during the quarter increased 2 percent to Rs 4,896.7 crore YoY as there was proprietary products out-licensing income in Q2FY20, and the same grew by 11 percent QoQ.

The global generics business registered a 21 percent YoY growth, with North America rising 28 percent, Europe 36 percent and India 21 percent in the quarter ended September 2020.

"The growth in global generics business was driven primarily on account of new product launches, volume traction in the base business and integration of the acquired business from Wockhardt in India," said Dr Reddy's.

Global research firm Credit Suisse has maintained an outperform call on the stock and has cut target to Rs 5,550 from Rs 5,750 per share. It is of the view that Q2 was better than expected with strength driven by US sales. Earnings momentum should continue with more limited competition launches, according to a CNBC-TV18 report.