ICICI Direct is bullish on Dr Reddy's Laboratories has recommended buy rating on the stock with a target price of Rs 4615 in its research report dated May 21, 2020.
ICICI Direct's research report on Dr Reddy's Laboratories
Revenues grew 10.4% YoY to Rs 4448.9 crore, mainly due to strong growth in the US and Europe. Domestic revenues grew 5.1% YoY to Rs 683.9 crore. US revenues grew 20.8% YoY to Rs 1807.2 crore. Despite a dent in GM, EBITDA margins expanded 101 bps to 21.3% due to lower employee and other expenses. EBITDA grew 15.9% YoY to Rs 949.2 crore. Adjusted net profit grew 71.5% YoY to Rs 781.1 crore. Delta vis-à-vis EBITDA was mainly due to negative tax outgo (-6.2% in Q4FY20 vs. 25.5% in Q4FY19).
Despite the recent rally, the expected margin expansion and earnings upgrade still leave scope for upside. We upgrade from HOLD to BUY and arrive at a target price of Rs 4615 based on 22x FY22E EPS of ~Rs 209.7.
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