Dr Reddy's Labs Q4 profit may jump over 5-fold but revenue seen down 2%

Drug major Dr Reddy's Laboratories is expected to show more than 5-fold rise in fourth quarter consolidated profit at Rs 415.8 crore YoY due to low base in same quarter last year.

The company had reported profit of Rs 74.6 crore in Q4FY16 as that had impacted due to writedowns of Rs 400 crore on account of Venezuela.

Revenue during the quarter may fall 2 percent year-on-year to Rs 3,680 crore due to lower US growth, according to average of estimates of analysts polled by CNBC-TV18.

US business may continue declining on the back of pricing pressure, lack of high ticket launches, reaudit of facilities with warning letter February onwards, impact of cancellation of contract supply by McNeil Health in Q1FY17 and rupee appreciation (but mitigated by emerging market currencies strengthening).

US revenue is likely to be flat QoQ. US sales declined for all three quarters of FY17.

India growth slowed to 2 percent only in Q3, which is likely to bounceback sequentially post demonetisation. Analysts expect India to grow 9-14 percent for the quarter YoY.

Emerging markets may see single digit decline led by Venezuela but ex-Venezuela, EM should may over 10 percent. In Q3, EM including Russia and CIS was down 7 percent but ex-Venezuela was up 7 percent.

DRL had stopped sales to Venezuela. Venezuela was impacted due to oil crisis and no repatriation.

Pharma services & active ingredients (PSAI) business may be impacted due to lower US approvals.

Operating profit is seen rising 58.3 percent year-on-year to Rs 760.3 crore and margin may expand 810 basis points to 20.7 percent in the quarter ended March 2017.

Commentary on recent spate of USFDA inspections will be closely watched.

The stock lost 15 percent in 2017 on multiple issues such as USFDA reinspections, pricing pressure in the US and lack of high ticket launches.