This Largecap Pharma Stock’s Sales Grew Rs. 52.2bn, ‘Buy’: Prabhudas Lilladher

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of Dr. Reddy’s Laboratories (DRRD) is Rs. 4,260. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 4,750. This stock has the potential to give 11.50% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 68,080 crore.

Stock Outlook  
Current Market Price (CMP) Rs. 4,260
Target Price Rs. 4,750
Potential 1 year return 11.50%
52 week high share price Rs. 5,077.00
52 week low share price Rs. 3,654.00

The company’s adjusted for one-time divestment income (Rs. 2.3bn), revenues were flat YoY and below our estimate. The miss was largely on account of lower US and PSAI sales. US sales came in at $231mn (down 13% QoQ), impacted by price erosion and competition in certain key products. Domestic business grew 26% YoY aided by divestment of certain brands to Torrent Pharma (Rs. 1.4bn) and JB Chemical (Rs. 0.9bn).

Prabhudas Lilladher says: Why Should You Buy This Stock?

Prabhudas Lilladher says: Why Should You Buy This Stock?

Commenting about the stock, the brokerage firm said, “DRRD reported EBIDTA of Rs9.2bn; Adjusted for divestment income, EBIDTA came in at Rs. 6.9bn vs our estimate of Rs. 10.5bn impacted by weak GMs and lower revenues. The company’s Q1FY23 profitability adjusted for one-time divestment income was weak impacted by lower GMs and US sales. Our FY24E EPS stands reduced by 4%. We expect margins to improve with easing of commodity and as revenue scale up with new launches in US like gRevlimid. India revenues were healthy. We estimate margins ex of gRevlimid at 19% and 22% in FY23E and FY24E. We maintain our ‘Buy’ rating with revised target price of Rs. 4,750/share (Rs. 4,900 earlier). At CMP, DRRD is trading at 20x P/E on FY24E adjusted for gRevlimid. We assign 22x FY24E EPS plus Rs. 250/share for gRevlimid NPV. Delay in key ANDA approvals and prolonged inflationary environment of raw material prices are key risks to our call.”

Company portfolio: Dr. Reddy's Laboratories

Company portfolio: Dr. Reddy’s Laboratories

The company is a leading pharma stock. Its adjusted GMs came in lower at 47.3% (down 500 bps YoY); impacted due to adverse forex, higher commodity prices. Other operating income came in higher at Rs. 6bn aided by $72mn of settlement income from Indivior. PSAI sales declined by 6% while EU increased by 4% YoY. Russia sales declined by 8.6% YoY on the back of channel inventory normalization post stocking up in Q4. RoW declined by 7% YoY. Segment wise PSAI margins were at 15.7% (18.4% in Q4) and generic margins were at 55% vs 58.2% in Q4.

Disclaimer

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.





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