Hold Dr. Reddys Laboratories; target of Rs 2520: Edelweiss

Edelweiss' research report on Dr. Reddys Laboratories
Dr. Reddys Laboratories (DRRD) reported weak set of numbers for Q1FY18 with revenue up 3%, whereas EBITDA and adjusted PAT tumbled 19% and 53% YoY, respectively. Operating margins declined to 9% - partially (~20%) owing to channel destocking in domestic market, and major (80%) part due to the tectonic shift in US market where channel consolidation and intensifying competition is creating havoc.

Outlook

Several issues pose downside risks to DRRD’s earnings. At CMP, the  stock trades at 18.6x FY19E EPS. We maintain ‘HOLD/SP’.

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