Buy Dr. Reddy's Laboratories; target of Rs 5406: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Dr. Reddy's Laboratories has recommended buy rating on the stock with a target price of Rs 5406 in its research report dated January 30, 2021.

Broker Research

February 08, 2021 / 15:44 IST

26 Aug, 2025 12:21

Volume

Todays L/H

Prabhudas Lilladher's research report on Dr. Reddy's Laboratories

We reduce our estimate by 2-5% for FY21-23E due to delay in launch of key molecules (gCopaxone, gVascepa and gNuvaring) and also reduce benefit from gRevlimid to Rs194/share (earlier Rs262) over FY23E-26E on possibility of BMS entering into settlement agreement with few more generic players for FY23E launch. DRRD recently received another CRL for gCopaxone, which would delay the launch by 4-6months, while a new generic (Teva) launch of Nuvaring increases further competitive intensity. We expect DRRD to launch gCopaxone now in 4QFY22E (v/s earlier expectation of 1HFY22E), while gNuvaring price erosion to be much steeper. Even with the near-term headwind we maintain our positive outlook, as DRRD continues to be one of the best play in large cap pharma given its control on overheads, focus on branded generic in EM markets, strategic launches, monetizing R&D and renewed focus in India formulations. It also has clean bill of health from key regulators which is an additional lever for growth.

Outlook

We maintain BUY (Unchanged) but reduce our TP to Rs5,406 (earlier Rs5,975) as we reduce our earnings estimate for key products due to delay in launch of key molecules. We also reduce our multiple assign on FY23 EPS of Rs227 to 23x PE (versus earlier 24x) due to near-term impact on the prospect of core US generics post steep impairment charges on key molecules acquired from Teva. Our TP includes Rs194/share benefit from gRevlimid (using NPV method) over FY23- 26E.

For all recommendations report, click here