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Drug maker Dr Reddy's stock has been battered following the announcement of Q1FY22 results on July 27. In the last two trading days, the stock has fallen by 13 days. Shares of Dr Reddy's are trading at Rs 4707.50 down by 2.82 percent at 11.35 am on July 28.

So why Dr Reddy's shares have taken a beating, and what analysts are saying.

Earnings miss

Dr Reddy’s Q1FY22 earnings missed street expectations. The CNBC-TV18 poll had estimated a net profit of Rs 700 crore on revenue of Rs 4,991.4 crore. EBITDA was expected at Rs 1,168.5 crore with a margin of 23.4 percent. But Dr Reddy's ended up with net profit of Rs 570.8 crore a YoY drop of 1.5 percent, revenues of operations grew YoY 11.4 Rs Rs 4,919.4. It was the drop in EBITDA margins that has been a cause of concern. The EBITDA margin narrowed by 560 bps to 20.7 percent from 26.3 percent, on a year-on-year basis.

There are several reasons for drop in margins.

US generics which contributes about 37 percent of overall sales also critical for healthy margins is where Dr. Reddy’s saw high price erosion with competition to some of its key products. The other concerns according to analysts are the deferment of offtake by Dr Reddy's customers in the Pharma Services and Active Ingredients (PSAI), reduced export benefit and higher inventory provisions for certain products.

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Explainer: Why Dr Reddy's stock is taking hit post Q1FY22 earnings?

In last two trading days, the stock has fallen by 13 days. Shares of Dr Reddy's are trading at Rs 4707.50 down by 2.82 percent at 11.35 am on July 28.

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