The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.
KR Choksey's research report on Dr. Reddy’s Laboratories
Dr. Reddy’s laboratories reported adj. revenue growth at 10.3% YoY (-1.5% QoQ) to INR 52.59 bn in Q4FY22. This was driven by 10.0% YoY (-0.7% QoQ) increase in revenue from operations to INR 50.68 bn, 26.6% YoY (-29.8% QoQ) decline in license fees and services income to INR 1.52 bn and a 4.3% YoY (+104.8% QoQ) decline in other operating revenue to INR 381.0 mn in Q4FY22 • EBITDA margins declined 168 bps YoY (-242.0 bps QoQ) to 20.4% in Q4FY22 • Excluding one-time incomes from sale of anti-bacterial brands Ciprolet and Levolet in Russia and Daffy bar and Combihale in India of INR 2.16 bn, litigation expenses of INR 983.0 mn and impairment expenses of INR 7.42 bn (Tepilamide Fumarate tablets etc.), the company witnessed its adjusted net profits grow at 29.0% YoY (+1.0% QoQ) to INR 7.21 bn in Q4FY22.
Outlook
As such we maintain the target price of INR 5,261 on the shares of Dr. Reddy’s, with an upside potential of 23.1% from its CMP of INR 4,275/ share. Accordingly, we maintain our “BUY” rating on the shares of Dr. Reddy’s.
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