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Last Updated : Jul 26, 2016 06:08 PM IST | Source: CNBC-TV18

No disturbing trend in Dr Reddy's numbers except topline: Expert

Shetty says that she has her doubts on a possible revival of revenues saying that the eight drugs bought from Teva for the US market, will take till 2019 to affect Dr Reddy's revenues.

There are no disturbing trends in the Q1 FY17 results of Dr Reddy's Laboratories except its topline, says Sarabjit Kour Nangra, Vice President - Research, Angel Broking. Her expectation from the topline was moderate. But she feels the results are much worse than expectations.

The topline performance of the company for the first quarter has been poor mainly due to the effect of competition for its drugs Valcyte and Vidaza finally coming in, says Meeta Shetty, AVP Equity Research, Kotak Securities. 

The remedial efforts taken by the company to bring its 3 Indian plants in compliance with the US Food and Drug Administration, along with poor performance in countries like Venezuela, may also be a big reason for the decline in the topline, says Shetty.

She also adds that she has her doubts on a significant pick-up revenues saying that the eight drugs bought from Teva for the US market will take till 2019 to affect Dr Reddy's revenues.

Below is the verbatim transcript of Meeta Shetty and Sarabjit Kour Nangra’s interview to Ekta Batra, Sonia Shenoy and Anuj Singhal on CNBC-TV18.

Ekta: Disappointing quarter?

Kour: Very much disappointing in terms of all counts if I have to see but mainly I the main disappointment is on the topline. We were expecting a moderate numbers on the topline any which ways but it is a significant dip and specially it is coming on the back of all the geographies doing very poorly.

Ekta: How would you look at the topline growth? I assume that would be one of the key disappointments this time?

Kour: Yes, that is what I said. More than internals I don\\'t see much disturbing trends in the internal but except for R&D I guess which is also moderate year-on-year (Y-o-Y) if I look at percent to sales it will appear higher because the sales are lower but Y-o-Y it is nine percent which is decent. So, overall I don\\'t find any disturbing trend in the numbers at all except for the topline. So, that is the main concern in these numbers.

Anuj: Your first thoughts on the margin mess, the overall numbers and your call on the stock?

Shetty: Definitely numbers are pretty bad. Topline has come in lower than expected. The key thing to remember here is US which is roughly about at 232 which is this quarter is sharply down and this is the first quarter where we are going to see impact of Vizada as well as Valcyte\\'s competition and more so with Vizada because launches have happened towards the end of last quarter or so. So, coming quarters will be even more difficult for Dr. Reddy\\'s as we are not factoring in any good launches to come in but competition is definitely going to increase. So, bad numbers on the topline itself plus the one offs and things have obviously disappointed to a large extent.

Ekta: So, how would you approach future earnings for Dr. Reddy\\'s now because barring the margins like you mentioned topline seems to be a bit uncertain, where is growth coming from?

Shetty: Definitely as I said coming quarters, specially second quarter, third quarter should see some more impact on the competition side for US and India is also going to be a bit difficult because Dr. Reddy\\'s has already indicated in their Form 20 that the impact from the bans which were coming in will impact the domestic growth overall. So, US which is about 50 percent, domestic which is about 12 percent both these segments will not be doing that great. Emerging markets is anyways in a difficult scenario right now because of the currency. So, we believe it is going to be a difficult year for the company overall.




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First Published on Jul 26, 2016 04:50 pm
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