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As Dr Reddy's rises after earnings, should you buy or sell stock?

The company reported a 15 percent year-on-year rise in consolidated revenues from operations to Rs 5,437 crore for the March quarter.

May 20, 2022 / 09:35 AM IST
Dr Reddy's Laboratories

Dr Reddy's Laboratories

 
 
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Dr Reddy's Laboratories share price rose nearly three percent in early trade on May 20 a day after the company announced its March quarter earnings.

Dr Reddy's reported a 76 percent year-on-year decline in consolidated net profit at Rs 88 crore, way below analysts' expectations of Rs 677 crore, largely due to impairment of non-current assets worth Rs 751.5 crore.

The company reported a 15 percent year-on-year rise in consolidated revenues from operations to Rs 5,437 crore.

Dr Reddy's said that during the quarter it marked down the value of tepilamide fumarate extended release tablets by Rs 433 crore, Shreveport cash generating unit by Rs 305 crore and saw impairment of Rs 17 crore in other intangible assets.

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Here is what brokerages have to say about the stock and company after March quarter earnings

Credit Suisse

The research house has kept a neutral rating on the stock on high market expectations from Revlimid opportunity. It has kept a target of Rs 4,465.

The good launch momentum in the US will continue while concerns remain about potential litigation from payers for Revlimid generic, said Credit Suisse.

The market is factoring in sustenance of low price erosion environment, CNBC-TV18 reported.

Morgan Stanley

The brokerage has maintained an overweight rating on the stock with a target of Rs 5,202.

The company continues to deliver granular growth across its businesses and continues to invest in complex generics, biosimilars and NCEs, said Morgan Stanley.

The firm targets double-digit growth in India and emerging markets, CNBC-TV18 reported.

Prabhudas Lilladher

"US and India revenues were healthy. We continue to expect steady earnings momentum and pickup in US generic business along with cost optimisation. Also, strong pipeline/new launches will drive steady growth in India and rest of the world.

"We expect 13 percent earnings per share compound annual rate over FY22-24 (excluding Revlimid) and broadly maintain our estimates at ‘Buy’ rating with revised target price of Rs 4,900.

"Delay in key ANDA (abbreviated new drug application) approvals and prolonged inflationary environment of raw material prices are key risks to our call."

Sharekhan

"Strong growth prospects across business, opportunities from vaccines exports, sturdy product pipeline, and expected growth in the portfolio in the US would likely enable the firm to tide over pricing pressures in the US and provide ample growth visibility.

"Also, an expected gradual recovery in the PSAI segment bodes well. The stock is trading at a P/E multiple of 18.5/16.3x its FY23/FY24 earnings per share.

"While near-term cost pressures could affect the performance, long-term growth levers are intact. We retain our Buy recommendation on the stock with an unchanged price target of Rs 5,550."

At 09:22 hrs Dr Reddy's was quoting at Rs 4,037.20, up Rs 109.15 or 2.78 percent on the BSE.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Rakesh Patil
first published: May 20, 2022 09:35 am
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