Buy Dr. Reddy's Laboratories, target price Rs 5600: Axis Securities

Axis Securities has buy call on Dr. Reddy's Laboratories with a target price of Rs 5600. The current market price of Dr. Reddy's Laboratories is Rs 4730.1. Time period given by analyst is one year when Dr. Reddy's Laboratories Ltd. price can reach defined target.
Dr. Reddy's Laboratories Ltd., incorporated in the year 1984, is a Large Cap company (having a market cap of Rs 77528.53 Crore) operating in Pharmaceuticals sector.

Dr. Reddy's Laboratories Ltd. key Products/Revenue Segments include Pharmaceuticals, Licence Fees, Other Operating Revenue, Spent Chemicals, Service Income and Scrap for the year ending 31-Mar-2021.



Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 5992.40 Crore, up 18.59 % from last quarter Total Income of Rs 5053.00 Crore and up 20.76 % from last year same quarter Total Income of Rs 4962.10 Crore. Company reported net profit after tax of Rs 971.10 Crore in latest quarter.


Investment Rationale
The brokerage believes DRREDDY has a healthy pipeline of gRevlimid in FY23E and Pegfiltarism (biosimilars) in FY24E. Furthermore, revenue from vaccines such as Sputnik-V, Remedesiver, etc, may add to its growth going forward. However, the company’s Gross Margins may get impacted due to price erosion in the US market in the upcoming quarters. Furthermore, DRREDDY believes that the eight observations by the USFDA at the recently audited reserve site are addressable within the stipulated time frame. Keeping this in perspective, the brokerage recommends a BUY rating on the stock with a Target Price of Rs 5,600.

Promoter/FII Holdings
Promoters held 26.72 per cent stake in the company as of 30-Sep-2021, while FIIs owned 27.76 per cent, DIIs 21.4 per cent.