Edelweiss's research report on Dr Reddys LabsDr Reddy’s (DRRD) Q3FY16 revenue/EBITDA/PAT grew 3%/12%/1%. While US grew 10% in CC terms and India’s organic growth was ~19%, currency headwinds hurt growth in Russia and emerging markets (Ems). Even when DRRD guided for better US launches in FY17 versus FY16, it hinted at tougher times ahead. We believe the time for currency woes to translate into significant challenges in conducting business in Russia and Venezuela has arrived. On the Warning Letter front, DRRD submitted CAPA commitments to FDA in Dec’15 and believes it can accomplish its work on its own end in next 5‐6 months. We maintain ‘HOLD’. While we believe DRRD’s complex generic pipeline could unfold a number of niche opportunities, the numerous near term issues pose risks to earnings. Given the significant risks to branded business in Venezuela and Russia, we rationalise our target multiple to 18x (20x earlier) and our new TP is INR3,120. Maintain ‘HOLD/SP’. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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