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Buy Dr. Reddy’s Laboratories; target of Rs 4869: KR Choksey

KR Choksey is bullish on Dr. Reddy’s Laboratories has recommended buy rating on the stock with a target price of Rs 4869 in its research report dated July 29, 2022.

July 31, 2022 / 03:34 PM IST
The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

 
 
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KR Choksey's research report on Dr. Reddy’s Laboratories


Dr. Reddy’s Laboratories reported adjusted Revenue growth at 1.2% YoY (-4.9% QoQ) to INR 50.03 bn due to muted growth in the global generics (GG) segment revenue and a decline in the PSAI revenue in Q1FY23. GG was affected by slower revenue growth or decline in it, in the US, Europe and Emerging markets in Q1FY23. PSAI witnessed a decline due to a higher base in Q1FY22 due to higher sales of COVID 19 products then. The company has underperformed our expectations by 43.0% on EBITDA and 45.0% on net profits in Q1FY23. The company earned a set of unusual gains, such as income from sale of brands in India of INR 2.30 bn and recognition of settlement receivables of INR 5.64 bn in Q1FY23. Adjusting for these gains, adjusted PAT declined 30.0% YoY (-45.2% QoQ) to INR 3.95 bn in Q1FY23.



Outlook


As such we reduce the target price to INR 4,869 (from the earlier target of INR 5,261) on the shares of Dr. Reddy’s. As the new target price gives an upside potential of 19.0% from its CMP of INR 4,090/ share, we maintain our “BUY” rating on the shares of Dr. Reddy’s.

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Dr. Reddy's Laboratories - 290722 - kr

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first published: Jul 31, 2022 03:34 pm
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