ICICI Securities retains buy reating on Dr Reddy's Laboratories

CMP: Rs 421.90

TARGET PRICE: Rs 495

ICICI Securities (I-Sec) has retained its ���buy��� rating on pharma major Dr Reddy���s Laboratories, with a price target of Rs 495, saying improving the visibility of launches of big products in the US, and enhanced focus on base business, will help the company report strong earnings over the next couple of years.

���Once the US FDA approval is in place by end-H1FY10, DRL will launch generic Prilosec OTC and may not face a new competitor for at least a year, leading to approximately $30-million profit upside. Generic Arixtra may get the US FDA approval in the next 8-12 months as it will be filed this month by DRL. We have assumed that the product will be launched in April 2010 with $22 million potential profit upside during the first year of launch,��� the I-Sec note to clients said.

���In our recent meet, the CEO indicated that DRL will focus more on sustaining base business growth with the goal of improving margin & RoCE (return on capital employed),��� the note added.