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The stock of Dr Reddy’s lost about 2 per cent on Wednesday, following muted performance in the September quarter. Consolidated revenue grew at a sedate 7 per cent to ₹3,588 crore.
This was largely on account of moderation in the pace of growth in the US market to 8 per cent, from healthy double-digit levels over the last few quarters.
Growth hit
High base in the US given that key products such as decitabine were launched during the same quarter last year, slowdown in the pace of new launches (one product launched during the quarter as against four launches in the June quarter) and weakness of US dollar against rupee impacted growth in this geography.
Russia and CIS, which are critical markets for Dr Reddy’s, continued to struggle in the September quarter. Revenues in this high-margin geography declined 13 per cent, due to adverse currency move. Constant currency sales in this market remained flat for the quarter.
The company, however, managed to sustain mid teen level growth in the home market (14 per cent).
Operating profit margin
Higher research spend (11.5 per cent of total revenues this quarter compared with 9.5 per cent in the same period last year) and increased selling and administrative costs, ate into the company’s operating profit margin, which declined by 4 percentage points year-on-year to 24.3 per cent.
Weak operating performance and increased tax outgo – to 17 per cent of pre-tax profit – led to a 17 per cent drop in Dr Reddy’s net profit to ₹574 crore.
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