Buy Dr Reddy's Laboratories; Target Of Rs 6000: ICICI Direct
ICICI Direct is bullish on Dr Reddy's Laboratories recommended buy rating on the stock with a target price of Rs 6000 in its research report dated October 29, 2020.
Nov 4, 2020 / 09:37 PM IST
ICICI Direct's research report on Dr Reddy's Laboratories
Q2 revenues grew 2.0% YoY to Rs 4911 crore (I-direct estimate: Rs 4564 crore) mainly due to strong growth across segments partly offset by high base effect in Q2FY20 (divestiture of certain proprietary products). US revenues grew 28.5% YoY to Rs 1833 crore on the back of rupee depreciation and new product launches. Domestic revenues grew 21.5% YoY to Rs 912 crore due to Wockhardt integration and Covid products. Europe revenues grew 35.8% YoY to Rs 375 crore due to new launches and currency tailwinds. PSAI segment posted a robust 19.7% YoY growth to Rs 851 crore. EBITDA margins expanded 144 bps YoY to 23.5% (I-direct estimate: 22.7%) due to lower other expenses partly offset by higher raw material & staff costs. Subsequently, EBITDA grew 8.7% YoY to Rs 1156 crore vs. I-direct estimate of Rs 1037 crore. PAT de-grew 30.3% YoY to Rs 772 crore (I-direct estimate: Rs 608 crore). Delta vis-à-vis EBITDA was mainly due to negative tax in Q2FY20.
We maintain BUY and arrive at a target price of Rs 6000, which includes a base business value of ~Rs 5485 (25x FY23E EPS of Rs 219.4) + Rs 515 for NPV of gRevlimid.
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