Hold Dr Reddys Laboratories; target Rs 1650: Emkay

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Hold Dr Reddys Laboratories; target Rs 1650: Emkay

Emkay Global Financial Services has maintained hold rating on Dr Reddys Laboratories with a target price of Rs 1650 in its February 3, 2012 research report.

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RELATED NEWS Sell Transformers; target of Rs 159: KRChoksey Buy Essar Ports; target of Rs 107: ICICIdirect.com Buy Nava Bharat Ventures; target of Rs 298: SPA Research ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Dr Reddys Labs See messages about Dr Reddys Labs Dr Reddys Labs BSE | NSE 01/06/12 Are Mutual Funds betting on Dr Reddys Labs?

Emkay Global Financial Services has maintained hold rating on Dr Reddys Laboratories with a target price of Rs 1650 in its February 3, 2012 research report.

"Dr Reddys Laboratories, Q3FY12 Results - Revenues at Rs 2.77bn (up 46%YoY), b) EBITDA at Rs 8.7bn (up 129% YoY) and c) APAT at Rs 4.9bn (up 82% YoY). Zyprexa contributed USD99mn, excluding this base business grew 22% YoY led by US biz which grew by 29% & INR dep. Base biz margins were flat YoY and declined 110bps QoQ led by flat growth in Russia and lower benefit from DEPB. APAT declined 10% YoY and 18% QoQ to Rs 2.5bn. Going forward, even though lot of Para-IVs are lined up for launch in US, upsides are largely priced in. Unless there is an improvement in base biz."

"North American business, to witness growth of ~25% CAGR (FY11- FY13) due to new product launches and increase in market share of existing products. Ziprasidone - Market Size US$800m, likely launch in Mar 12'. We expect sales of USD20mn and EPS of Rs 3. But the launch can be delayed by 6months, if USFDA grants PED to innovator. Plavix - Market size US$6.6b, likely launch in May'12, expect sales of USD56mn and EPS of Rs 6.2. Lipitor - Market size US$5500, likely launch in May'12, expect sales of USD24mn annual sales and EPS of Rs 2.6."

"We expect Dr. Reddy to report 23% base revenue growth in FY12E and 13% growth in FY13E. We expect base EBIDTA margins to move from 19.9% in FY11 to 20.4% in FY12 and 21.5%% in FY13. Earnings will grow by 11% CAGR over FY11-13E. We maintain our target price on the stock to Rs 1650 (20x base business earnings of Rs 79 + NPV of Rs 75 from Para IVs) with a Hold rating. At CMP, the stock is trading at 18x FY12E and 17x FY13E earnings," says Emkay Global Financial Services research report.

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