X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Dr. Reddy's: Outstanding performance - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Aug 1, 2002

    Dr. Reddy's: Outstanding performance

    Dr. Reddy's has reported an outstanding all round performance for the first quarter of FY03. Continued buoyancy in sales coupled with improving margins have led to strong earnings growth for the company. Dr.Reddy's has disclosed global consolidated revenues as per US GAAP. On a consolidated basis, the company reported a stupendeous 115% rise in net profits and a 51% growth in revenues on the back of strong growth in API's (Active Pharma Ingredients) and continued progress in the generics business.

    Dr. Reddy's - Consolidated Results Snapshot
    (Rs m) 1QFY02 1QFY03 % change
    Sales 2,995 4,533 51.4%
    Other Income (99) 32 -132.3%
    Expenditure 2,479 3301 33.2%
    Operating Profit (EBDIT) 516 1,232 138.8%
    Operating Profit Margin (%) 17.2% 27.2%
    Profit before Tax 456 1307 186.6%
    Tax 16 95 493.8%
    Profit after Tax/(Loss) 440 1,212 175.5%
    EPS (Rs.) 5.8 15.9
    EPS (Rs.) (annualised) 23 64
    P/E (at current price) 13.3

    Click here to view standalone Indian financials

    Since the company has booked considerable chunk of its revenues through US subsidiaries, it makes more sense to analyse the consolidated revenues. On a consolidated basis, the company has reported a net profit of Rs 1,212 m, profits on a standalone basis are Rs 801 m. This effectively means that the company has booked a substaintial Rs 411 m of net profits between its US and UK subsidiaries. Management clarified that huge clincial development and legal expenses cost abroad seems to be the rationale for booking a considerable chunk of revenues in the subsidiaries books. It may be recalled that the company recently took over the formulations business of BMS Labs in UK. The company is utilising BMS Labs for launching new product in the UK.

    Revenue Mix
    Particulars 1QFY02 1QFY03 % change
    API's (A) 1,220 1,753 43.7%
    India 379 520 37.2%
    International 841 1,233 46.6%
    Branded Formulations (B) 1,354 1,566 15.7%
    India 919 1,042 13.4%
    International 435 524 20.5%
    Generics 319 1,070 235.4%
    Emerging Business (D) 90 99 10.0%
    Custom Chemical Business (E) - 28 NA
    Others (F) 12 17 NA
    Total (A to F) 2,995 4,505 50.4%

    The highlight of the quarterly performance was an unexpected 44% rise in the API business driven mainly by sales to Europe and US. US API sales leapfroged 73% on account of export consigments for small quantities of two key products (Tizanidine and Doxazosin), which contributed 33% to the API revenues. Revenues from API exports are expected to catapult in the future considering the fact that the company has filed 3 DMF's (Drug Master Filings) in the last quarter and expected to file 4 more in the currrent quarter.

    Coming to branded formulations, the company reported an overall 16% growth with both domestic and International business performing well. The growth in the domestic market was driven by performance of its key products like Nise and Stamlo Beta. It may be recalled that the company acquired 6 dental brands in India from a local Indian company (Groupe Pharma) last year, which also added to domestic formulations sales in the current quarter.

    The quarterly sales for generics business does not include any extra-ordinary one time revenues. The marketing exclusivity over fluoxetine ended in January '02. Fluoxetine sales, however, contributed over 75% of the generics turnover at Rs 798 m (US $ 16 m), far above our expectations. It may be recalled that the company markets fluoxetine in the US through its partner Par Pharma with a 50: 50 profit sharing agreement. Revenues, in the US subsidiary's books, are recorded as and when sale confirmation is received from Par pharma, which could have a lag effect. The company currently enjoys 40% market share in fluoxetine. However, the price erosion has been sharp (almost 80%) and two other competitiors have entered the market. Considering the same, revenues from fluoxetine are unlikely to be sustained.

    Going forward, break through in speciality pharma business is expected to fuel growth. This includes some difficult to manufacture products and branded products for the US markets. It may again be recalled that the company has filed application under section 505 (b) for marketing generic version of Pfizer's multi-billion dollar product 'Amolipine Maleate'. (Section 505 (b) allows three years of generic exclusivity for certain changes in the dosage forms or combinations, which are accompanied by new clinical study). This is a very big opportunity for the company and we expect revenues of Rs 3.7 bn (US $ 77 m) in first year of the product's launch. Going by this argument, put forward by the management, the company seems to be confident of launching the product by the next financial year. The company has mentioned that Maleate will be the key product driving their speciality segment initiatives in USA. Considering the size of the product with huge margins, financial markets would be eagerly watching the developments on the Amlodipine front.

    The R&D expenses of the company have risen from Rs 62 m to Rs 205 m largely driven by clinical trial costs. The research budget of the company is likely to remain buoyant going forward, as the company intends to gear up its clinical trials and regulatory filings in the US. The R&D spend as a % of sales is expected to remain in the range of 7.5 - 8% of sales going forward. It may be recalled that the company received a major setback recently with the suspension of clinical trials for its outlicensed anti-diabetic molecule (Ragaglitazar). There have been concerns, offlate, that management has delayed disclosure of Ragaglitazar facts.

    Read about the recent R&D setback for Dr. Reddy's.

    The company has posted an EPS of Rs 15.9 for the first quarter, which is well above market expectations. Partially, this is likely to get corrected, as sales and profitability from fluoxetine taper down in the ensuing quarters. However, export growth story of the company remains in place with continuing generics monentum and the company penetrating further into new geographies. We would soon be revising our estimates upwards on the back of the splendid performance recorded by the company in the first quarter. In the near term, a breakthrough in the speciality pharma segment, especially from amlodipine maleate could drive sentiment for the stock. The stock price of the company may bounce back after witnessing a free fall last forthnight following disappointment over the Ragaglitazar molecule.

     

     

    Equitymaster requests your view! Post a comment on "Dr. Reddy's: Outstanding performance". Click here!

      
     

    More Views on News

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    Dr Reddy's: Major Business Segments Come Under Pressure (Quarterly Results Update - Detailed)

    Sep 12, 2016

    Dr Reddy's has announced the results for first quarter of FY17 (1QFY17). The company has reported decline in the sales by 13.9% YoY while net profits declined by 79.8 % YoY.

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    DR. REDDYS LAB SHARE PRICE


    Aug 23, 2017 10:47 AM

    TRACK DR. REDDYS LAB

    • Track your investment in DR. REDDYS LAB with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    DR. REDDYS LAB - ADCOCK INGRAM COMPARISON

    Compare Company With Charts

    COMPARE DR. REDDYS LAB WITH

    MARKET STATS