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Target: ₹1,449
CMP: ₹1,303
Dr Reddy’s quarterly earnings were above our expectations on the revenue front but lower on earnings. On the revenue front, DRRD reported the highest-ever quarterly revenue of ₹8,038.20 crore, with a robust y-o-y growth of 16.5 per cent and 4.4 per cent q-o-q, the increase was mainly driven by growth in the global generic business. EBITDA reported at ₹2,076.50 crore (+3.4 per cent y-o-y and -2.5 per cent q-o-q) and the margin saw a decline of 326 bps y-o-y and 184 bps q-o-q to 25.8 per cent on account of change in the mix and one-time acquisition-related cost.
PAT saw a decline of 9.5 per cent y-o-y and 3.6 per cent q-o-q and stood at ₹1,341.90 crore for the quarter. The company is focusing on strengthening its core business across the markets with a robust product portfolio.
Dr Reddy’s growth story is based on the growth in the base business and high quality R&D efforts towards developing complex value products, including generic injectables, peptides, and biosimilars. We expect Dr Reddy’s revenue/EBITDA/PAT to grow at a CAGR of 11.6/11.5/11.2 per cent over FY24-27.
We have introduced FY27E and valued the stock at Sep-26E EPS and arrived at a TP of ₹1,449 (17x) with a Hold rating on the stock.
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