Dr. Reddy’s Labs slumps nearly 10 per cent on weak Q1 numbers, should you invest?

By: | Updated: July 27, 2016 4:17 PM

Dr. Reddy's Laboratories posted 76 per cent fall in net profit at Rs 153.50 crore for the quarter ended June 30, 2016 against Rs 647.40 crore in the corresponding quarter a year ago.

Dr Reddy's Labs shares q1 resultsDr. Reddy’s Laboratories posted 76 per cent fall in net profit at Rs 153.50 crore for the quarter ended June 30, 2016 against Rs 647.40 crore in the corresponding quarter a year ago.

Dr. Reddy’s Laboratories’ shares slumped nearly 10 per cent on Wednesday after the company posted lower-than-expected first quarterly numbers. It had posted 76 per cent fall in net profit at Rs 153.50 crore for the quarter ended June 30, 2016 against Rs 647.40 crore in the corresponding quarter a year ago. These numbers remained below analyst expectation as the company cited sales in US market and hurdles in dispatched in Venezuela due to currency crisis as the reasons behind fall in Q1 numbers. The company’s net income from operations dropped 14.11 per cent to Rs 3222.50 crore against Rs 3752.20 crore in the same quarter last year. Brokerage House ICICI Securities was expecting the net profit to be at Rs 452.40 for April-June period.

At 9.46 am, share price of the company was trading 9.53 per cent down at Rs 3006.25. The scrip opened at Rs 3030.00 and has touched a high and low of Rs 3070 and Rs 2995, respectively in trade so far. Later, the scrip settled down 10.07 per cent at Rs 2988.40.

Kotak Institutional Equities expects drug major’s US business to face challenges from double-digit price erosion on base business. It has downgraded the stock to “Sell” from “reduce” and cut its target price to Rs 2,500 from Rs 3,100.

Sarabjit Kour Nangra, VP- Research Pharma, Angel Broking said “Dr Reddy’s posted posted bad Q1 numbers in first quarter of FY. It posted sales of Rs 3,235 cr as against Rs 3,900 cr expected, vs Rs 3,758 crin first quarter of FY2016, a year-on-year de-growth of 14.0 per cent. Sales growth of company was under pressure on back of muted de-growth in all its major markets. We maintain our NEUTRAL rating on the stock.”

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