UBS :: Dr. Reddy's Labs Q 4FY11: Strong beat

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
Dr. Reddy's Labs
Q 4FY11: Strong beat
􀂄 Q4FY11 Sales: Rs 20bn (+23% YoY, +6% QoQ);
Revenues were ahead of our est. of Rs 19bn driven by sharp jump in US sales
(+23%qoq) to US$130mn with ramp up of Prevacid and Prograf and launch of
Allegra D-24. India growth was weak, up 5%YoY to Rs 2.75bn, partly due to price
cuts while Russia (US$47mn) growth was strong at 41%YoY. PSAI business grew
13%YoY to Rs 5.55bn, while Betapharm sales declined 22%YoY to EUR 18mn.
􀂄 EBITDA: Rs 4.4bn (+25% YoY, +15%qoq); PAT Rs 3.35bn (+23%qoq)
Gross margin was relatively flat qoq at 54.3%. EBITDA margin expanded 180bps
qoq to 21.8% as SG&A decline offset R&D increase on a qoq basis. PAT was
helped by higher other income due to forex gain and profit on sale of land in
Mexico. However, mgmt. expects salaries to go up in Q1FY12.
􀂄 Mgmt. however reluctant to give any guidance
Mgmt. formally downgraded its FY13 revenue guidance by 10% to US$2.7bn and
didn’t give any guidance for FY12 citing growth remains dependant on US
launches which may be contingent on favourable regulatory/litigation outcomes.
Co. continues to await FDA decision on Fondaparinux. Mgmt. expects FY12
Capex of US$200mn and tax rate in the vicinity of 15%.
􀂄 Valuation: Maintain Buy, PT Rs 2,000
We derive our PT from a DCF-based methodology and explicitly forecast longterm
valuation drivers using UBS’s VCAM tool. We assume a WACC of 11%.