Dr Reddy's Laboratories (DRRD)
Pharmaceuticals
Slow start to the year, recalibrating estimates. 1QFY13 PAT missed our estimate of
Rs4 bn by 17% due to (1) severe pricing erosion in the US, (2) lack of approvals for
limited competition products, (3) high SG&A costs and (4) lower sales realization due to
hedges. We lower our FY2013E total sales to US$2.2 bn, down US$120 mn, lower than
management guidance of US$2.5 bn. We expect base business EBITDA margin
expansion to be constrained by high SG&A cost, limited expansion in gross margin and
higher R&D spend. We lower our FY2013-14 PAT estimates by 10-14% due to lower
sales, lower base business margin and a higher tax rate. Maintain REDUCE with TP of
Rs1,740, 20X 12 month forward base business core earnings.
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link: http://www.kotaksecurities.com/pdf/indiadaily/indiadaily20072012mk.pdf
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