MOSL: DR REDDY’S LABS (Neutral)-Price erosion/higher cost hurt earnings-Execution remains the key
Dr Reddy’s Labs: Price erosion/higher cost hurt earnings; Execution remains the key
(DRRD IN, Mkt Cap USD6.5b, CMP INR2748, TP INR2700, 2% Downside, Neutral)
- EM/Europe drive revenue growth: Revenues at INR40.2b were up ~14% YoY (our est. INR38.7b), led by sharp increase in proprietary product revenues (INR3b), robust 27% YoY growth at INR7b in emerging markets (EM) and 12% YoY growth at INR1.9b in the Europe business. Proprietary product revenues include one-time sale of derma brands (INR1.8b); adjusting for the same, revenue is up 8.5% YoY to INR38.4b. The overall growth was dragged to some extent by 3% YoY growth in US sales (INR15b) and moderate 6%/8% YoY growth in domestic/PSAI sales to INR6.5b/INR6.8b
- Inferior product mix and manufacturing overheads impact profitability: Adjusting for the one-time sale of its derma brands, gross margin (GM) declined ~330bp YoY (-90bp QoQ) to 50.2%, primarily due to competition in key products, higher manufacturing overheads, impact of inventory management and adverse currency movement. Although GM contracted, EBITDA margin expanded ~110bp YoY to 16.7%, mainly due to lower R&D expenses. EBITDA grew ~16% YoY to INR6.4b (our est. INR7.7b), while Adj. PAT is at INR3b (our est. INR4.1b). For FY19, sales/EBITDA/Adj. PAT stood at INR152b/INR30b/INR17.5b, an increase of +7%/+29%/+63% YoY.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.