Motilal Oswal's research report on Dr Reddy’s Labs
Dr. Reddy’s Labs (DRRD) delivered in-line operational performance in 1QFY23, adjusting for the multiple non-recurring factors. Muted performances in North America (NAM), Pharmaceutical services & ingredient (PSAI) and Russia segment was offset by domestic formulation (DF) segment. Niche launches are likely to revive sales prospects for NAM from 2HFY23 onwards. We maintain our FY23/FY24 EPS estimates and expect 16% earnings CAGR over FY22-24, backed by: a) limited competition product launches (such as gRevlimid in 2HFY23), b) steady industry outperformance in DF/Russia segment, c) revival in PSAI segment (through new launches/catering newer markets) and d) better outlook in Russia business.
We value DRRD at 24x 12M forward P/E multiple for its base business and add NPV of INR210 for gRevlimid to arrive at our TP of INR5,000. Maintain BUY.
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