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Dr Reddy's Labs Q1 Preview: Profit may decline on higher base, but revenue can grow over 5%

Sharekhan sees 167 bps increase in EBITDA margin due to cost savings and better revenue performance.

July 29, 2020 / 09:21 AM IST
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Pharma major Dr Reddy's Laboratories is likely to report a 25-30 percent year-on-year decline in Q 1FY21 profit on the back of higher base due to settlement claim of Rs 345.7 crore received from Celgene in April 2019, but the adjusted profit could see around 20 percent increase partly due to lower tax cost and better operating performance.

Revenue growth could be in single digits of more than 5 percent with likely flat growth in US business but sequentially the US business may see fall due to COVID-19 related stocking in Q4 FY20.

"We expect the US business to decline to $240 million (down by $11 million QoQ), impacted by one-time stocking in Q4 FY20, and offset by the benefit of recent launches. We forecast a 3 percent decline in India, while we expect Russia/CIS to grow 7 percent YoY. We expect rest of the world to grow at 3 percent YoY and expect the EU to grow 30 percent YoY. We also expect PSAI business to grow 5 percent YoY," said Kotak Institutional Equities which sees reported profit declining 29 percent but adjusted profit rising 20 percent with 6.7 percent revenue growth.

Better traction in Chronic portfolio and addition of Wockhardt portfolio may support India's business, said Motilal Oswal which expects 22 percent growth in adjusted profit.

At the operating level, its EBITDA (earnings before interest, tax, depreciation and amortisation) is expected to grow in double digits and margin may increase by more than 150 bps YoY.


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Sharekhan sees 167 bps increase in EBITDA margin due to cost savings and better revenue performance, while Kotak expects EBITDA to grow 17 percent and margin to expand by 179 bps YoY.
Moneycontrol News
first published: Jul 29, 2020 09:21 am
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