Accumulate Dr Reddys Laboratories; target Rs 2532: Angel
Brokerage house Angel Broking is bullish on Dr Reddys Laboratories and has recommended 'Accumulate' rating on the stock with a price target of Rs 2,532 in its research report dated August 1, 2013.
August 02, 2013 / 11:52 IST
Angel Broking's report on Dr Reddys Laboratories
"Dr Reddy's Laboratories (DRL) reported lower-than-expected numbers for 1QFY2014 on the top-line and bottom-line fronts. The EBIT margin came in at 13.3 percent vs our expectation of 16.8 percent. Consequently, the net profit came in at Rs 361cr, a growth of 7.4 percent, lower than our expectation of Rs 453cr. The margins fell higher than expected on back of higher R&D expenses during the period, which rose by 55 percent yoy.""DRL reported lower-than-expected numbers for 1QFY2014. The top-line posted a growth of 12.0 percent to Rs 2,845cr for the quarter, which is 14.8 percent lower than expectation of Rs 3,340cr. The top-line growth was primarily driven by global generics, which grew by 15 percent yoy driven by the US (which rose by 37 percent yoy). On the other hand the PSAI segment registered a growth of 6 percent yoy.""The EBIT margin came in at 13.3 percent, a yoy dip of 122bp, and lower than our expectation of 16.8 percent. Margin declined due to a 55 percent yoy increase in R&D expenses, which as a percentage of sales stood at 8.5 percent vs 6.2 percent of sales in 1QFY2013. The net profit came in at Rs 361cr, a growth of 7.4 percent yoy, but lower than our estimate Rs 453cr. The main reason for the same has been the contraction in EBIT margins."Outlook and valuation: "For DRL, we expect net sales to report a 14.9 percent CAGR to Rs 15,350cr and adjusted EPS to record a 10.8 percent CAGR to Rs 126.6 over FY2013-15. We recommend an Accumulate on the stock with a price target of Rs 2,532," says Angel Broking research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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