Dr Reddy’s share price fell over 4 per cent to hit an intraday low of Rs 4,055 on NSE despite that company reporting a 108 per cent on-year growth in its consolidated net profit at Rs 1,188 crore for the first quarter of FY23 as against a profit of Rs 571 crore registered in the year-ago period. Consolidated revenues for the pharmaceutical major rose 6 per cent on-year to Rs 5,215 crore as compared to a revenue of Rs 4,919 crore registered in the year-ago quarter. So far this year, Dr Reddy’s share price has tumbled more than 15 per cent, underperforming benchmark indices. However, analysts remain bullish and see some potential rally in the stock going forward.
Should you buy, hold or sell Dr Reddy’s shares?
Prabhudas Lilladher: Buy
Target price: Rs 4,750
Dr Reddy’s Q1FY23 profitability adjusted for one-time divestment income was weak, impacted by lower GMs and US sales, according to the brokerage. “Our FY24E EPS stands reduced by 4%. We expect margins to improve with easing of commodity and as revenues scale up with new launches in the US like gRevlimid. India revenues were healthy. We estimate margins ex of gRevlimid at 19% and 22% in FY23E and FY24E,” it said. Analysts at Prabhudas Lilladher maintain their ‘buy’ rating on Dr Reddy’s shares with a revised target Price of Rs 4,750 per share, down from Rs 4,900 earlier. Delay in key ANDA approvals and prolonged inflationary environment of raw material prices are key risks to their call.
JM Financial: Buy
Target price: Rs 5,685
Analysts at JM Financial are positive on the stock given that Dr Reddy’s US business is gearing up for gRevlimid launch in September this year. Company’s API and EM business are expected to improve sequentially. “We derive comfort from new launches/pipeline, injectable ramp up and 25% margin guidance that will drive growth over the long term,” they said. The brokerage values Dr Reddy’s at 25x FY24E earnings deriving a price target of Rs 5,685 (including gRevlimid of Rs 200). It maintains a ‘buy’ call on the stock and sees up to 33 per cent upside in Dr Reddy’s share price going forward.
Motilal Oswal: Buy
Target price: Rs 5,000
The brokerage firm maintains its its FY23, FY24 EPS estimates and expects 16% earnings CAGR over FY22-24, backed by: limited competition product launches (such as gRevlimid in 2HFY23); steady industry outperformance in DF/Russia segment; revival in PSAI segment (through new launches/catering newer markets); and better outlook in Russia business. “We value DRRD at 24x12M forward P/E multiple for its base business and add NPV of Rs 210 for gRevlimid to arrive at our target price of Rs 5,000,” it said adding that it retains its ‘buy’ rating on the stock.
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