Neutral Dr Reddy’s Labs; target of Rs 4500: Motilal Oswal

Neutral

Motilal Oswal's research report on Dr Reddy’s Labs

Adj. for divestment of brands in the domestic formulation (DF) segment, Dr. Reddy’s Labs (DRRD) recorded in-line sales in 4QFY23. However, it posted lower-than-expected EBITDA/PAT due to higher opex. DRRD delivered the highest-ever annual earnings in FY23, led by strong traction in g-Revlimid.

Outlook

We reduce our earnings estimates for FY24/FY25 by 7%/7.5%, factoring in 1) higher SGA expenses, 2) prolonged slowdown in the CIS business, and 3) some price erosion in export markets. We continue to value DRRD’s base business at 22x 12M forward earnings and add INR170 as NPV of g-Revlimid to arrive at a TP of INR4,500.

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Dr Reddy’s Labs - 11 -05 - 2023 - moti