Buy Dr Reddys Labs; target of Rs 3083: Prabhudas Lilladher

Prabhudas Lilladher's research report on Dr Reddys LabsDr Reddy’s (DRL) sales, EBITDA and PAT were at Rs 39.7bn, Rs 10bn and Rs 5.8bn respectively with 3%, 6% and 1% growth, in Q3FY16. Overall results were in line our estimates of Rs 39.4bn sales, Rs 9.8bn EBITDA and Rs 5.7bn PAT. Management expects increasing consolidation among channel partners and growing competition among generic suppliers, leading to its limited competition drugs such as oncology injectables (Imitrex, Reclast, Dacogen, Vidaza), Valcyte and Sirolimus witness strong price competition and lower market share in near term. In absence of approvals of key generics, its US generic sale may face challenging scenario in Q4FY16E and FY17E.With tepid guidance of sales in Q4FY16 and challenging competitive landscape looming large for US generics, we expect India formulations is the strong visible driver for DRL’s 7% revenue CAGR in FY17E‐18E. USFDA issues in three plants will also complicate approvals of key generics such Xeloda and Propofol in near term. We expect 14% CAGR in India formulations while PSAI and EM is expected to grow at 5‐7% CAGR in FY17E‐18E. We however expect better turnout from launch of NDA products in US in long term. We maintain ‘Accumulate’ and retain TP at Rs 3,083. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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