Equal weight on DRL, but target cut to Rs 3,339: Morgan Stanley

Morgan Stanley has maintained equal weight on Dr Reddy’s but cut the target price to Rs 3,339 from an earlier targe of Rs 3,574. The brokerage said near-term earnings challenge is underestimated while long-term prospects look intact. It said the FDA overhang is likely to keep the stock performance muted until FY18, though growth visibility has improved. There has been an erosion in base business in emerging markets, especially Russia, due to currency depreciation.

Incremental competition in gValcyte and higher R&D costs can compress margins, it said.