Neutral Dr Reddy’s Labs; target of Rs 5070: Motilal Oswal

Motilal Oswal's research report on Dr Reddy’s Labs

Dr. Reddy’s (DRRD)’s 3QFY21 performance was below expectations, weighed by moderation in the North America (NA) / Pharmaceutical Services and Active Ingredients (PSAI) segments and increased opex toward sales/promotion activities for the Branded Generics segment. DRRD has completed the integration of the Wockhardt portfolio and is in the process of harnessing synergy benefits in the Domestic Formulation (DF) segment. n We lower our EPS estimate by 8%/5%/4% for FY21/FY22/23E, factoring in a) a delay in the g-Vascepa launch, b) muted business prospects from gNuvaring, c) further queries on g-Copaxone, and d) an increase in operational cost. We continue to value DRRD at 25x 12M forward earnings to arrive at Target Price of INR5,070. We believe the current valuation provides a limited upside from current levels. Hence, we maintain Neutral.

Outlook

We continue to value DRRD at 25x 12M forward earnings and arrive at TP of INR5,070. We maintain Neutral on a limited upside from current levels.