Dr Reddy's Laboratories share price touched a 52-week high of Rs 4,447.80, rising more than 3 percent in the morning trade on July 30, a day after the company came out with its June quarter earnings.
The company reported a 12.6 percent year-on-year (YoY) drop in consolidated net profit at Rs 579 crore for the quarter ended June 2020.
The profit in the corresponding quarter of the last fiscal stood at Rs 662.8 crore.
Revenue from operations during Q1FY21 stood at Rs 4,418 crore, up 15 percent YoY.
Gross margin came at 56 percent in Q1FY21, up 430 bps over the previous year against 51.7 percent in Q1FY20 and up 450 bps against 51.5 percent in Q4FY20.
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Prabhudas Lilladher has downgraded the company to 'hold' from 'accumulate' due to limited upside potential at current valuation. However, it retained earnings estimates and target price of Rs 4,326 (PE 24x FY22E).
The company continues to be one of the best companies in largecap pharma space structurally, though there is limited headroom for a further upgrade in earnings estimate and PE expansion. However a re-rating in the near term is possible with an early launch of Nuvaring and Copaxone, sustainable growth of PSAI sales, India formulations growing above 15 percent and favorable hearing on gRevlimid, it added.
Motilal Oswal has kept the rating 'neutral' with a target price of Rs 4,600 per share.
Motilal Oswal expects a 21 percent earnings CAGR over FY20–22, led by a sales CAGR of 6 percent in the US, 19 percent in DF, and 23 percent in PSAI, supported by 340bp margin expansion.
It has raised EPS estimate by 11 percent/7 percent for FY21/FY22 and revised the target to Rs 4,600, valuing DRRD at 23x 12M forward earnings and maintained neutral on a limited upside from current levels, Motilal Oswal said.
Looking at the long-term monthly chart, the stock has formed a rounding bottom pattern over a five-year period. Thus, it has formed a major bottoming pattern, said Ashish Chaturmohta Head of Technicals and Derivatives, Sanctum Wealth Management.
Volumes on the upmove have been high, indicating buying participation in the stock. For the past three months, the stock was trading in a sideways range of Rs 4,190-3,614 and consolidating below its all-time high level of Rs 4,386.
Going forward, it (stock) has given a breakout from this range with long- body candle and on high volumes, suggesting the stock will test its all-time high and even trend higher, he added.
If Dr. Reddy’s moves above Rs 4,390, the next target would be Rs 4,750 and then Rs 5,000. On the downside, supports are seen at Rs 4,150 and then Rs 3,800 levels, he added.
At 0945 hours, Dr Reddy’s Laboratories was quoting at Rs 4,443.00, up Rs 142.80, or 3.32 percent, on the BSE.