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Prabhudas Lilladher
Dr Reddy’s (Accumulate)
CMP: ₹3,228
Target: ₹3,368
Dr Reddy’s Laboratories launched six generics in Q3FY15 which improves the company growth prospects in near- to medium-term. Among the launched products, we believe that Valcyte contributed around 33-40 per cent of the incremental sales q-o-q. We are encouraged with the quality of launches which included limited competition drugs (Taxotere, Sirolimus and Valcyte), shortage/demand driven product (Fluconazole) and OTC drugs (Habitrol and Fexo D12).
Dr Reddy’s outperformed the consensus estimates with 9 per cent y-o-y growth in revenue and 24.6 per cent adjusted Ebitda margin in Q3FY15. Dr Reddy’s surprised with higher sales in Russia (due to partial hedge and steep rouble depreciations towards the end of the quarter). ROW sales, however, were contributed by strong growth in Venezuela though there are concerns over restrictions over cash repatriation from the country. We increase our target price to ₹3,368 while maintaining recommendation at ‘Accumulate’ due to potential risk in bolivar and rouble.
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