Hold Dr Reddys Laboratories; target of Rs 1245: KR Choksey

KR Choksey's research report on Dr Reddys Laboratories

DRRD revenue, EBITDA, and PAT were largely in-line with our estimates. We expect the revenue to grow at 10.3% CAGR and PAT to grow at 5.2% CAGR over FY24-FY27E showing our confidence that the company is getting advanced in the biosimilars pipeline, key launches for cancer therapy and chronic constipation in India and launch of abatacept to gain market share. We reduce our FY26E/FY27E EPS estimates by 0.9% and 3.2% to INR 73.6/INR 77.8, respectively due to increased competition and pricing pressure in North America, and challenges in cardiovascular segments in India.

Outlook

We roll over our valuation multiple to FY27E and assign a PE multiple of 16.0x to arrive at a target price of INR 1,245 (previously: INR 1,329) reflecting challenges with pricing and competition in the key market. Therefore, we see limited upside potential and maintain a “HOLD” rating.

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