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Dr Reddy's Labs to announce Q4 numbers today, here's what brokerages expect

The company is expected to report double-digit growth in revenue on the back of the Wockhardt acquisition and good business in India and Europe but a drop in the US sales may dent profitability.

May 14, 2021 / 11:38 AM IST
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Pharma major Dr Reddy's Laboratories is to report its March quarter earnings on May 14.  Brokerages expect the Hyderabad-based company to post double-digit growth in revenue on the back of the Wockhardt acquisition and robust business in India and Europe but a decline in the US sales is expected to dent profitability.

In June 2020, Dr Reddy's completed the acquisition of select divisions of Wockhardt's branded generics business in India. Motilal Oswal expects consolidated revenue to grow 10.5 percent year-on-year (YoY) spurred by 36 percent YoY growth in India business on the back of strong traction in the chronic segment and addition of the Wockhardt portfolio. The brokerage said profitability may decline by 16.5 percent due to a 2 percent YoY fall in US sales to $246 million.

Despite weak YoY performance, Emkay expects Dr Reddys' US business to grow $3 million sequentially, driven by new launches in this quarter. According to the brokerage, the India business could show a growth of 33 percent but decline 5 percent quarter-on-quarter (QoQ) due to seasonality and low sales because of COVID.

"Strong momentum in Europe is expected to continue, while the API business is expected to remain flat," said Emkay. It expects EBITDA margin compress QoQ due to the increase in marketing activity, which

is expected to drive other expenses higher.

Kotak Institutional Equities forecasts a 36 percent YoY growth in India business benefitting from a low base and Wockhardt portfolio consolidation. Though on a QoQ basis, the brokerage forecasts a decline on account of lower COVID-19 portfolio contribution.

Kotak expects Russian business to grow 13 percent YoY, the Rest of the World business to grow at 22 percent YoY and European business to grow 25 percent YoY.

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The delay in Vascepa launch could also impact growth in the US. Key things to watch out for would be the update on generic Vascepa and other niche launches and update on ANDA filings and launches over the next 12-15 months.

At the operating level, Kotak expects EBITDA margin to decline 60 bps QoQ in Q4 FY21 as Q3 benefitted from one-time divestment income but sees more than 100 bps increase YoY. The brokerage expects 15 percent YoY growth in EBITDA.
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first published: May 14, 2021 11:38 am