Hold Dr. Reddys Laboratories; target of Rs 2660: Edelweiss

Edelweiss' research report on Dr. Reddys Laboratories

Dr. Reddys Laboratories’ (DRRD) Q4FY17 earnings continued to be weak after the unsustainable gross margin spike in Q3FY17. Revenue, EBITDA and adjusted PAT tumbled 5%, 25% and 4% YoY, respectively, hit by supply constraints and pricing pressure in US. Including the recent limited competition gVytorin launch, DRRD expects to launch >10 US products during FY18.

Outlook

We expect the base business to remain under pressure, unless there are key launches of gCopaxone and gNuvaring built in estimates. Maintain ‘HOLD’ with INR 2,660 (18x FY19E EPS) target price.