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.
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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