• JANUARY 31, 2001

Dr. Reddy's 3QFY01: The Cheminor muscle

Dr. Reddy’s has reported a 45% growth in net profits, in the third quarter of the current year on the back of a 77% topline growth. However, these numbers are not comparable as the current year’s third quarter numbers include those of Cheminor Laboratories. Infact, on a consolidated basis the company’s topline has grown by 26% plus while the net profit’s have grown by 14% plus. The margin growth has been relatively slower primarily because of the increase of the contribution from bulk drugs. (Bulk drugs contribute around 51% of the combined company’s turnover.)

(Rs m) 3QFY00 3QFY01 Change
Sales 1,210 2,144 77.2%
Other Income 3 84 2706.7%
Expenditure 908 1,687 85.9%
Operating Profit (EBDIT) 303 457 50.9%
Operating Profit Margin (%) 25.0% 21.3%  
Interest 30 76  
Depreciation 44 102 130.5%
Profit before Tax 231 362 57.0%
Other Adjustments   -  
Tax 10 43 326.0%
Profit after Tax/(Loss) 221 320 44.8%
Net profit margin (%) 18.2% 14.9%  
Earnings per share* 27.96 40.47  

While the bulk actives business grew by 27% the generic sales in developed market took off in the third quarter of December 31, 2000. The finished dosages at Rs. 998 m contributed to 46% of revenues. Another significant development in the third quarter was the fact that the company’s anti-cancer compound DRF 1042 entered Phase I of clinical trials.

During the quarter all the company’s main brands Omez (anti–ulcer), Nise (anti–pain), Enam (cardiovascular) and Stamlo registered growth rates much higher than the rate of growth of overall pharmaceutical formulations. While the industry grew by 11%, Omez grew by 20%. Nise registered a growth of 17%, while Enam and Stamlo (including Stamlo Beta) grew by 29% and 26% respectively. The company also launched eight new brands, which catered to therapeutic areas such as anti–arthritis, anti–diabetes and cholesterol reducers.

The stock quotes at Rs 1,300 currently which implies an earnings multiple of 32 times 3QFY01 earnings.

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