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Dr Reddy’s Q3 Preview | Revenue expected to increase 10-15%, PAT likely to grow 22-25%

ICICI Securities expects the India business to grow 10 percent YoY and that in the US by 12.8 percent QoQ led by new launches. It also foresees Russia, CIS & ROW (Rest of World) to show steady growth

January 28, 2022 / 12:29 PM IST
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Dr Reddy’s Laboratories, one of India’s top drugmakers with strong overseas play, is expected to report a healthy year-on-year growth in the domestic formulations business when it reports its third-quarter results on January 28.

Strong traction in chronic therapies and the addition of sales from Wockhardt’s portfolio would drive the growth, experts said. The Hyderabad-based firm’s main markets of the US and Canada are also expected to grow in the mid-teens.

The company is expected to report a consolidated net profit of Rs 780–780 crore for the quarter, up 22-25 percent from the year-ago period. On a sequential basis, the net profit is expected to decline 18-22 percent.

Brokerages expect the company to report a 10-15 percent year-on-year growth in consolidated revenue for the quarter at Rs 5,400–5,600 crore. On a sequential basis, the revenues may slip 3–6 percent.

The company reported a consolidated profit of Rs 19.8 crore (adjusting for extra ordinaries of Rs 597 crore, the adjusted profit was Rs 617 crore) in the corresponding period a year ago when the consolidated revenues were clocked at Rs 4,930 crore.

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The consolidated profit in the September quarter was Rs 992 crore with consolidated revenues at Rs 5,763 crore.

Kotak Institutional Equities

The consolidated revenue for the quarter is expected to grow by 14 percent on-year to Rs 5,617 crore, while on a sequential basis, a decline of 3 percent is likely, a report by analysts at Kotak Institutional Equities has said.

“We expect North America business (including Canada) to increase $13 million QoQ to $265 million led by launch of Revlimid in Canada and higher contribution from Kuvan powder,” the brokerage said in its report.

For India, it forecasts a flattish 4 percent growth on-year due to contribution from Sputnik vaccine. “We expect Russia to remain flat at 5.1 percent YoY growth, and expect EU to grow 12 percent YoY,” added the brokerage.

EBITDA (earnings before interest, tax, depreciation and amortization) is likely to improve by 8.7 percent on-year to Rs 1,224 crore from Rs 1,126 crore. This is a decline of 8.4 percent on-quarter from Rs 1,336 crore.

“We expect gross margin to fall 50 bps QoQ and expect EBITDA margin to decline 140 bps QoQ to 21.8 percent despite marketing spend in India benefitting from operating leverage” the report said.

The company’s EBITDA margins was 23.2 percent in the previous quarter and 22.8 percent during the same period last year.

It expects the net profit to increase by 23 percent on-year to Rs 761 crore from the adjusted net profit of Rs 617 crore. On a sequential basis, however, a decline of 23 percent is expected from Rs 992 crore reported in the previous quarter.

Edelweiss Research

Edelweiss Research expects North America revenues (around $248 million) to increase 5 percent on-year but slip 2 percent sequentially on account of rapid price erosion in gRevlimid in Canada, limited new launches and modest increase in market share in gCiprodex, gVascepa that will be set off against price erosion.

It said, “India business remains solid and we forecast 14 percent YoY growth despite remdesivir in base”. It expects the performance of Emerging Markets to moderate from the highs of the the preceding quarter but sees an 8 percent YoY growth in this market.

Edelweiss expects consolidated revenues of Rs 5,531 crore with a YoY growth of 12.2 percent and a decline of 4 percent on quarter.

EBITDA is likely to improve by 11.5 percent on-year to Rs 1,256 crore, sequentially this is a decline of 6 percent.

EBITDA margins at 22.7 percent are likely to be flat YoY with input cost headwinds partly compensated by flattening SG&A (Selling, General & Administrative) investments.

The brokerage expects the net profit to increase by 26.5 percent on-year to Rs 780 crore, resulting in a sequential decline of 6 percent.

ICICI Securities

ICICI Securities is more conservative in its estimates for the company, expecting the revenue to grow by 9.6 percent on-year to Rs 5,403 crore and decline 6.2 percent on-quarter.

The brokerage expects India to grow 10 percent YoY led by strong performance of the base business. “We expect US to grow 12.8 percent QoQ to $265 million led by new launches and expect Russia, CIS (Commonwealth of Independent States & ROW (Rest of World) to show steady growth,” it said.

ICICI Securities added that the company’s pharmaceutical services and active ingredients (PSAI) business is likely to grow 15 percent YoY on a low base.

In view of this, EBITDA is likely to improve 5.6 percent on-year to Rs 1,189 crore but decline 11 percent sequentially.

On the margins, the brokerage said that, “EBITDA margins are estimated at 22 percent with a contraction of 80 bps on year and 120 bps decline compared to the previous quarter.”

It expects the net profit to improve by a modest 13.7 percent YoY to Rs 702 crore for the quarter, thereby registering a decline of 29 percent from the previous quarter.

The stock closed at Rs 4,256, down Rs 146.5,  from its previous close on the National Stock Exchange on January 27. The stock has slipped 13 percent in the last year and lost 10 percent in the last month.



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Gaurav Sharma
first published: Jan 28, 2022 07:17 am
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