Dr. Reddy’s Laboratories witnessed a 5% decline in its share price during Wednesday’s opening trades, following the company’s Q4 earnings report released post-market hours on Tuesday. The share price of Dr. Reddy’s Labs dropped 4.78% to an intra-day low of Rs 5952.70 on the NSE.
In its Q4FY24 earnings report, Dr. Reddy’s Laboratories disclosed a net profit of Rs 1,307 crore, marking a 36% increase year-on-year from Rs 959 crore in the corresponding quarter of the previous year. However, the net profit showed a sequential decrease of 3% compared to Rs 1,348 crore reported in the December 2023 quarter.
Revenue from operations increased by 12% year-on-year to Rs 7,083 crore, but experienced a 2% decline quarter-on-quarter (QoQ). This revenue figure fell short of the ET Now poll estimate of Rs 7,237 crore.
Additionally, the pharmaceutical company declared a final dividend of Rs 40 per share for the financial year 2023-24.
Brokerages on Dr Reddy’s Lab
JM Financials on Dr Reddy’s Lab
JM Financials maintains a ‘BUY’ rating on Dr. Reddy’s Laboratories, citing the company’s strong compliance, prudent capital allocation, and diversified geographic mix, particularly in India and the US, as factors expected to continue creating value. The report sets a Mar’25 target price of Rs 6935, including a gRevlimid option value of Rs 393.
According to a report by JM Financials on Dr. Reddy’s Laboratories, the pharmaceutical company’s US business has sustained strong momentum despite lower base business volumes and price erosion in key products. JM Financials anticipates Dr. Reddy’s US business to grow in single digits over the next two years, partially driven by increased gRevlimid volumes and new launches.
The report acknowledges that while over 25 meaningful launches between FY25-27 may not entirely offset the gRevlimid cliff, they are expected to contribute positively to the company’s earnings excluding Revlimid. Additionally, the recovery in Dr. Reddy’s India business, reporting an 11% adjusted growth, is viewed positively, with expectations for the company to deliver growth surpassing Indian Pharmaceutical Market (IPM) averages over the next two years.
The report also adds Management’s focus on innovation and licensing deals is noted, along with elevated R&D expenses and guidance for FY25 slightly ahead of expectations at 8.5-9%.
Motilal Oswal on Dr Reddy’s Lab
According to a recent report from Motilal Oswal, Dr. Reddy’s Laboratories has delivered fourth-quarter revenue that aligns with the brokerage’s estimates.
However, the earnings before interest, taxes, depreciation, and amortization (EBITDA) fell short of expectations due to increased selling, general, and administrative (SGA) expenses, as well as higher research and development (R&D) spending.
The report highlights Dr. Reddy’s Lab’s strategic moves to expand its offerings beyond the US generics and branded generics segments. This includes ventures, partnerships, and acquisitions in nutraceuticals, vaccines, women’s health, and dietary supplements.
Maintaining its earnings estimates for FY25/FY26, Motilal Oswal values Dr. Reddy’s Lab based on a sum-of-the-parts approach, with a target price of Rs 6,070. This valuation accounts for 22 times the 12-month forward earnings for the base business and Rs90 per share for gRevlimid.
Despite a strong 30% year-on-year earnings growth in FY24, the brokerage anticipates a moderation in earnings growth to a 3.5% compound annual growth rate (CAGR) over FY24-26.
This is attributed in part to the gradual increase in market share of g-Revlimid. However, investments in joint ventures with Nestle and in the biosimilar segment are expected to yield commercial benefits post-FY26.
Motilal Oswal maintains a Neutral rating on Dr. Reddy’s Lab stock, believing that the current valuation adequately reflects the potential upside in earnings.
(Disclaimer: Views, recommendations, opinion expressed are personal and do not reflect the official position or policy of Financial Express Online. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)