In line with the impressive results from other Indian pharmaceutical companies, Dr. Reddy's has also reported impressive results. While the turnover has jumped 45% in the second quarter vis–a–vis the corresponding period last year, the net profit has galloped 146%.
Operating Profit (EBDIT)
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One of the key reasons for the impressive growth in profitability is the surge in sales of finished dosages both in the domestic and the international markets. While exports to Russia have almost tripled (partly due to the fact that the company had tightened supplies to the Russian market last year), exports to other international markets have grown by 95% quarter on quarter. Domestic finished dosages have grown by 35% outstripping the 12% industry growth by a mile.
The company's major brands Omez (anti–ulcer) and Nise (anti–pain) continue to ranked among the top 25 brands as per ORG. Besides, the company has introduced two new brands Irnocam and Cytogem for colorectal and lung cancer respectively in the current quarter.
Interest cost and depreciation for the quarter have increased over 50% primarily due to additional borrowings and capex respectively on account of the acquisition of American Remedies. The company has however not clarified the extent of contribution of American Remedies to the current quarter's turnover.
The stock quotes at Rs 1,380 which implies an earnings multiple of 31 times second quarter annualised earnings. The net profit is however, in line with our full year projections of a net profit of Rs 1,130 m. Our projections however take into account the merger with group company Cheminor Laboratories. Dr. Reddy's is expected to merge the same in the current year only. We would rather wait for the third quarter results before revising our projections.
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