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Strong quarters ahead
Dr Reddy’s numbers picked up this quarter led by US launches and
improvement in PSAI growth, a trend that is likely to continue over
coming four quarters resulting strong profit growth. While this quarter’s
margins were slightly lower than expectations due to higher SG&A spend,
high margin US launches (Zyprex, Geodon) and a favourable currency will
aid margins going forward. We expect 40-70% PAT growth over coming
four quarters. Maintain BUY.
Sales growth led by US formulations and PSAI
Dr Reddy’s 2QFY12 sales at Rs22.7bn up 21% YoY are higher than expected
due to strong US and PSAI sales. US sales at Rs6.3bn were up 42% YoY led
by key launches like Allegra D24 and Arixtra during the quarter and due to
market share gains in existing portfolio. We expect US to be very strong over
coming 3-4 quarters led by market share gains and new launches (Zyprexa,
Geodon, Lipitor and Propecia). PSAI segment picked up this quarter after a
couple of weak quarters and will continue to deliver strong numbers over
coming quarters due to a low base and benefit from favourable currency.
Healthy trend in branded markets except India
Domestic formulations grew 10% YoY better than previous quarters
nonetheless lower than market growth rate. Some of leading brands (Nise,
Omez) of Dr Reddy’s are not growing well resulting in a weak India growth.
The company continues to maintain that they will be able to revive growth to
market average levels by 4QFY12. Growth in Russia and CIS markets was
quite strong (22% YoY) primarily led by volume uplift while pricing is marginal
contributor. Do note that Russian currency was unfavourable on a YoY basis
(Ruble weakened against INR) – hence growth is even higher in Ruble terms.
Strong quarters ahead, favourable currency helps further
Over the coming four quarters, we expect very strong numbers both at
revenue and profit levels led by major US launches like Zyprexa (launched on
25th Oct) and Geodon (expected in March 2012). Further a favourable
currency will aid in margin expansion in both US as well as PSAI business. Dr
Reddy’s has added forward covers (now at US$700m+) during Aug-Sept 2011
and have locked their revenues at Rs47-49/ US$. This ensures that they
derive margin benefits even if rupee starts to strengthen next year.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong quarters ahead
Dr Reddy’s numbers picked up this quarter led by US launches and
improvement in PSAI growth, a trend that is likely to continue over
coming four quarters resulting strong profit growth. While this quarter’s
margins were slightly lower than expectations due to higher SG&A spend,
high margin US launches (Zyprex, Geodon) and a favourable currency will
aid margins going forward. We expect 40-70% PAT growth over coming
four quarters. Maintain BUY.
Sales growth led by US formulations and PSAI
Dr Reddy’s 2QFY12 sales at Rs22.7bn up 21% YoY are higher than expected
due to strong US and PSAI sales. US sales at Rs6.3bn were up 42% YoY led
by key launches like Allegra D24 and Arixtra during the quarter and due to
market share gains in existing portfolio. We expect US to be very strong over
coming 3-4 quarters led by market share gains and new launches (Zyprexa,
Geodon, Lipitor and Propecia). PSAI segment picked up this quarter after a
couple of weak quarters and will continue to deliver strong numbers over
coming quarters due to a low base and benefit from favourable currency.
Healthy trend in branded markets except India
Domestic formulations grew 10% YoY better than previous quarters
nonetheless lower than market growth rate. Some of leading brands (Nise,
Omez) of Dr Reddy’s are not growing well resulting in a weak India growth.
The company continues to maintain that they will be able to revive growth to
market average levels by 4QFY12. Growth in Russia and CIS markets was
quite strong (22% YoY) primarily led by volume uplift while pricing is marginal
contributor. Do note that Russian currency was unfavourable on a YoY basis
(Ruble weakened against INR) – hence growth is even higher in Ruble terms.
Strong quarters ahead, favourable currency helps further
Over the coming four quarters, we expect very strong numbers both at
revenue and profit levels led by major US launches like Zyprexa (launched on
25th Oct) and Geodon (expected in March 2012). Further a favourable
currency will aid in margin expansion in both US as well as PSAI business. Dr
Reddy’s has added forward covers (now at US$700m+) during Aug-Sept 2011
and have locked their revenues at Rs47-49/ US$. This ensures that they
derive margin benefits even if rupee starts to strengthen next year.
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