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Last Updated : Feb 01, 2019 08:30 AM IST | Source:

Dr Reddy's Q3 preview: Analysts expect strong profit but moderate revenue growth

Kotak, which sees 2.4% growth in topline, also forecasts 12% YoY growth for India

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Pharma major Dr Reddy's Laboratories is likely to report strong growth in bottomline in Q3 due to low base in year-ago quarter. Profit in Q3FY18 had fallen 29 percent YoY.

Brokerages expect profit growth in the range of 20-60 percent YoY. Sharekhan expects a profit growth of 60 percent while Edelweiss Securities sees 42 percent growth in bottomline.

According to analysts, there could be moderate growth in revenue due to single-digit growth in the US business against double-digit rise in India and Russia businesses.

"We expect US revenue ($250 million) to grow 5 percent QoQ in constant currency, on launch of gWelchol, gGleevec, gHygroton, gAggrenox and gRenvela. We expect India/Russia to grow 15/23 percent YoY on favourable bases," said Edelweiss which expects 3.1 percent growth in revenue from operations.

Emkay expects steady domestic revenue growth of 10 percent YoY, supported by Derma and Anti Diabetic therapeutic areas. "We anticipate the Europe business to pick up on the back of new launches and stabilisation of supplies to the market."

Kotak, which sees 2.4 percent growth in topline, also forecasts 12 percent YoY growth for India, while it expects Russia/CIS to grow 19 percent YoY with CIS benefitting from a favourable base effect as well.

"We expect proprietary products to continue with sluggish trend with only 6 percent QoQ growth off a low base," it said.

While Prabhudas Lilladher said benefits from one-off sales of gSuboxone to be absent in Q3FY19 has kept QoQ growth lower.

At operating level, brokerages were mixed in expectations for EBITDA (earnings before interest, tax, depreciation and amortisation).

"The cost rationalization program should help overall EBITDA margin to expand sequentially (up 25 bps QoQ but down 129 bps YoY)," Emkay said while Kotak expects gross margins to remain stable at around 55.3 percent in the quarter.

"We expect EBITDA margins to expand to 20.2 percent, benefitting from cost control in SG&A (flat QoQ), offset by higher R&D spend," Kotak said while Prabhudas Lilladher expects EBITDA to fall 8.3 percent YoY and 4.3 percent QoQ.

Edelweiss expects EBITDA margins to grow 100bps YoY to around 20.5 percent led by cost rationalisation and INR depreciation. "EBITDA may grow 15 percent YoY and 19 percent QoQ."
First Published on Feb 1, 2019 08:30 am
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