Dr Reddy’s Q3 Preview | Sharp drop in net profit likely on slump in US revenues

On the India business front, the drug maker expects a growth of 5 percent on-year on the back of acquired products, while the PSAI segment is expected to decline 16.3 percent during the period.

“We expect North America base business (ex-Revlimid) sales to grow 4 percent on-quarter to $245 million, led by market share gains in gKuvan, steady trends in gVascepa and gSuboxone, which will offset volume declines in gCiprodex and Vasopressin AG. In our estimates, we factor in $35 million of gRevlimid sales in the US in the third quarter of FY23 for DRRD, as against $115 million in the second quarter of FY23. We expect DRRD's domestic sales to grow 6 percent YoY in 3QFY23. Owing to lower gRevlimid sales, we expect a sequential decline of 550 bps in DRRD's 3QFY23 EBITDA margin. On a YoY basis, though, we expect DRRD's EBITDA margin to improve 200 bps in 3QFY23 to 24.6 percent.”

Analysts at BNP Paribas also expect the US sales to normalise around a range of $290-300 million as Dr Reddy’s benefited from the exclusivity of gRevlimid in selective dosages. They project confidence in the Russia business and expect it stabilise.

Kotak Securities pegs YoY growth in Russia and Europe at 18 percent and 11 percent, respectively, in 3QFY23. “After a weak 2QFY23 due to inventory provision in Covid products as well as pricing and volume pressure in the non-Covid portfolio, we expect PSAI sales to grow 19 percent QoQ in 3QFY23. Owing to lower gRevlimid sales, we expect a sequential decline of 550 bps in DRRD's 3QFY23 EBITDA margin. On a YoY basis, though, we expect DRRD's EBITDA margin to improve 200 bps in 3QFY23 to 24.6 percent.”

Overall, Revenue and EBITDA are expected to decline 6.7 percent and 24.9 percent on a quarterly basis, as per a Moneycontrol poll.

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