Buy Dr. Reddy's Laboratories, target price Rs 5685: JM Financial
Dr. Reddy's Laboratories Ltd., incorporated in the year 1984, is a Large Cap company (having a market cap of Rs 71762.83 Crore) operating in Pharmaceuticals sector.
By ETMarkets.com | Updated:
Agencies
JM Financial has buy call on Dr. Reddy's Laboratories Ltd. with a target price of Rs 5685. The current market price of Dr. Reddy's Laboratories is Rs 4184.25. 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 71762.83 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 31-03-2022, the company reported a Consolidated Total Income of Rs 5596.80 Crore, up 3.76 % from last quarter Total Income of Rs 5394.10 Crore and up 15.38 % from last year same quarter Total Income of Rs 4850.80 Crore. Company reported net profit after tax of Rs 86.50 Crore in latest quarter.
Investment Rationale
The diversified revenue mix offers more sustainable earnings visibility over the medium to long term. While the US pipeline remains robust, Europe and emerging market expansion-driven growth under Horizon 1 is expected to outpace US. Horizon 2 entails 50-100 bps incremental R&D spend (translating to INR 2 bn+ annually) thereby pushing the R&D costs to 10-11% (from c. 8% in FY22). Of this, 25-30% shall be for NCE/biosimilars and >50% is expected to be for global R&D. Dr Reddy’s domestic business is expected to outperform IPM growth by scaling up brands and inorganic play. API business with backward integration in 70%+ molecules is expected to improve gross margins by over 500 bps over the next 5 years. Dr Reddy trades at c.17x FY24 earnings providing an attractive entry point.
Promoter/FII Holdings
Promoters held 26.72 per cent stake in the company as of 31-Mar-2022, while FIIs owned 25.16 per cent, DIIs 24.79 per cent.
Dr. Reddy's Laboratories Ltd., incorporated in the year 1984, is a Large Cap company (having a market cap of Rs 71762.83 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 31-03-2022, the company reported a Consolidated Total Income of Rs 5596.80 Crore, up 3.76 % from last quarter Total Income of Rs 5394.10 Crore and up 15.38 % from last year same quarter Total Income of Rs 4850.80 Crore. Company reported net profit after tax of Rs 86.50 Crore in latest quarter.
Investment Rationale
The diversified revenue mix offers more sustainable earnings visibility over the medium to long term. While the US pipeline remains robust, Europe and emerging market expansion-driven growth under Horizon 1 is expected to outpace US. Horizon 2 entails 50-100 bps incremental R&D spend (translating to INR 2 bn+ annually) thereby pushing the R&D costs to 10-11% (from c. 8% in FY22). Of this, 25-30% shall be for NCE/biosimilars and >50% is expected to be for global R&D. Dr Reddy’s domestic business is expected to outperform IPM growth by scaling up brands and inorganic play. API business with backward integration in 70%+ molecules is expected to improve gross margins by over 500 bps over the next 5 years. Dr Reddy trades at c.17x FY24 earnings providing an attractive entry point.
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Promoter/FII Holdings
Promoters held 26.72 per cent stake in the company as of 31-Mar-2022, while FIIs owned 25.16 per cent, DIIs 24.79 per cent.
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