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Centrum Broking
Dr Reddy's Lab (Buy)
Target: ₹6,400
CMP: ₹5251.25
Dr Reddy's Laboratories has reported earnings below our estimates largely due to weakness in demand in EMs driving lower sales and higher taxes. India sales were lower on account of lower Covid-19 drugs demand and seasonally weak quarter. US numbers were in growth against our estimates of a minor decline.
We believe the global generics and PSAI gross margins were steady during the quarter improved sequentially for PSAI segment. Sputnik-V opportunity of 250 million doses in India in FY22 significantly improves earnings while we believe the core business also offers strong trajectory of growth with improved focus on the margins.
DRL is better poised to scout more brand acquisition deals focused in India even beyond Wockhardt, given the strong balance sheet. Key Assets: The gNuvaring CRL – responded and await replay from USFDA, Oct21; and gCopaxone – CRL has been received again, response expected in couple of months. DRL CGMP compliance status is at best level, as EIRs have been received for all pending facilities.
We maintain our Buy recommendation on DRL with target price at ₹6,400 inclusive of NPV from largely gRevlimed and SputnikV.
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