MOSL: DR REDDY’S LABS (Neutral)-Launch/regulatory issues causing pain for a pharma giant
Dr Reddy’s Labs: Launch/regulatory issues causing pain for a pharma giant
(DRRD IN,Mkt Cap USD5.2b, CMP INR2135, TP INR2170, 2% Upside, Neutral)
- G-Suboxone, better product mix and leverage benefit drive earnings: DRRD's revenue grew ~12% YoY to INR37.2b, led by g-Suboxone as well as strong growth in the domestic business (on a low base of last year) and the emerging markets. Gross margin improved ~400bp YoY (up ~200bp QoQ), led by a superior product mix in global generics, and Pharmaceutical Services and Active ingredients (PSAI) segments. This, coupled with stable operating costs and lower R&D expense, led to EBITDA margin expansion of ~1,110bp YoY to 20.4%. EBITDA came in at INR7.6b (est. of INR6.5b). Lower tax rate of 8.9% (v/s 23.4% in 1QFY18 and 19.4% in 4QFY18) drove strong PAT growth to INR4.6b (est. of INR2.7b).
- India, emerging markets drive revenue: US business grew ~6% YoY to INR16b (~USD237m). New launches continue driving growth, partly offset by pricing pressure in the base business. India business grew 30% YoY, partly due a low base (GST-led disruption in 1QFY18). Revenue from emerging markets grew 16% YoY, led by CIS countries, Romania and ROW market.
Dr. Reddy's Laboratories is an integrated global pharmaceutical company committed to providing affordable and innovative medicines. Co. derives its revenues from the sale of finished dosage forms, active pharmaceutical ingredients and intermediates, development and manufacturing services provided to innovator pharmaceutical and biotechnology companies, and license fees from marketing authorizations for its products. Co.'s principal areas of operation are in global generics, pharmaceutical services and active ingredients, and proprietary products.
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Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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