Buy Dr Reddys Labs; target of Rs 3684: Emkay

Emkay's research report on Dr Reddys Laboratories

Overall results better than expectations with stronger revenues and steady EBITDA. Inline net income supported by higher other income of Rs1bn

Surprisingly stronger ROW market performance which includes Venezuela, with overall revenues of Rs3.8bn, an 8% sequential growth

The sharp compression in over the past few quarters due to fears over exposure to markets like Russia, Venezuela as well as other troubled EM’s seems to be overdone. Expect some of these concerns to abate in coming months

Retain our BUY stock rating, raise our target price to 3684 (earlier 3280) valuing the stock at 20x FY17e EPS of Rs188/share. Key risk remains delays in regulatory approvals for the Srikakulam plant which has been issued a 483 warning

"We believe DRL’s underperformance and valuation multiple de-rating on account of various factors is largely behind. However delays in approval of Srikakulam may mean risk earnings especially in FY16. Raise our Target price to 3684/share valuing company at 20x FY17e EPS of 184/share. Buy the stock", says Emkay Global Financial Services research report.

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