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EARNINGS REVIEW
Dr. Reddy's Laboratories (REDY.BO)
Neutral Equity Research
Inline with expectations: On track for $2.7bn revenue target by FY13
What surprised us
Dr Reddy’s Laboratories (DRL) reported 4QFY11 revenues of Rs20.17bn,
which were 4.4% above Bloomberg consensus on the back of strong
revenue growth in North America (+68% yoy), Russia (+26% yoy) and
strong API sales (+52% yoy) in Europe. Net income of Rs3.34bn came in
line with GSe but 28% ahead of consensus (incl. Rs292mn for gain on sale
of land). EBIT of Rs3.8bn was 11%/14% above GSe/consensus on account
of better- than- expected EBIT margins of 19.1% (+360 bp qoq) due to new
product launches in US. DRL witnessed broad-based growth in all
geographies, in line with our expectations (except India and emerging
markets). Management reiterated that the company is on track for
achieving US$2.7bn revenue target by FY13. They now have 75 ANDAs
pending for approvals in US out of which 37 are Para IVs and 10 are FTFs.
Domestic generic revenues were weak (+5% yoy) due to seasonality and
bonus offers launched by peers.
What to do with the stock
We maintain our Neutral rating on the stock, as we believe that current
valuation is a fair reflection of the growth expectations. We maintain that DRL
has the 2
nd
best pipeline in our coverage, implying 23% sales CAGR over
FY11E-FY13E. We fine tune our estimates for FY12E-FY13E by under 1% to
adust for 4QFY11 and introduce FY14E EPS of Rs141.72. Our 12-m Director’s
cut-based TP of Rs1,507 implies a P/E of 16.5X on FY12E EPS, inline with the
sector. Risks: More FTF launches (upside); slower sales ramp up (downside)
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Dr. Reddy's Laboratories (REDY.BO)
Neutral Equity Research
Inline with expectations: On track for $2.7bn revenue target by FY13
What surprised us
Dr Reddy’s Laboratories (DRL) reported 4QFY11 revenues of Rs20.17bn,
which were 4.4% above Bloomberg consensus on the back of strong
revenue growth in North America (+68% yoy), Russia (+26% yoy) and
strong API sales (+52% yoy) in Europe. Net income of Rs3.34bn came in
line with GSe but 28% ahead of consensus (incl. Rs292mn for gain on sale
of land). EBIT of Rs3.8bn was 11%/14% above GSe/consensus on account
of better- than- expected EBIT margins of 19.1% (+360 bp qoq) due to new
product launches in US. DRL witnessed broad-based growth in all
geographies, in line with our expectations (except India and emerging
markets). Management reiterated that the company is on track for
achieving US$2.7bn revenue target by FY13. They now have 75 ANDAs
pending for approvals in US out of which 37 are Para IVs and 10 are FTFs.
Domestic generic revenues were weak (+5% yoy) due to seasonality and
bonus offers launched by peers.
What to do with the stock
We maintain our Neutral rating on the stock, as we believe that current
valuation is a fair reflection of the growth expectations. We maintain that DRL
has the 2
nd
best pipeline in our coverage, implying 23% sales CAGR over
FY11E-FY13E. We fine tune our estimates for FY12E-FY13E by under 1% to
adust for 4QFY11 and introduce FY14E EPS of Rs141.72. Our 12-m Director’s
cut-based TP of Rs1,507 implies a P/E of 16.5X on FY12E EPS, inline with the
sector. Risks: More FTF launches (upside); slower sales ramp up (downside)
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