Buy Dr Reddy's Laboratories; target of Rs 5000: ICICI Direct

ICICI Direct's research report on Dr Reddy's Laboratories

Revenues grew 14.7% YoY to Rs 4426 crore (I-direct estimate: Rs 4305 crore) mainly due to strong growth in Europe (up 47.7% YoY) and RoW markets (up 56.6% YoY) partly offset by 10.1% YoY fall in domestic sales to Rs 626 crore. PSAI segment also posted robust 88.4% YoY growth to Rs 855 crore. US revenues grew 5.9% YoY to Rs 1728 crore due to rupee depreciation. EBITDA margins expanded 611 bps YoY to 25.3% due to a better overall operational performance. Subsequently, EBITDA grew 51.2% YoY to Rs 1121 crore. Net profit de-grew 12.1% YoY to Rs 595 crore. Delta vis-à-vis EBITDA was mainly due to higher tax rate and higher other income in Q1FY20.

Outlook

We believe the efforts taken in the last few quarters are sustainable and should support stable performances, going ahead. We maintain BUY and arrive at a target price of Rs 5000 based on 25x FY22E EPS of ~Rs 200.

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