Add Dr. Reddy’s Laboratories, target price Rs 5214: ICICI Securities

ICICI Securities has given add rating to Dr. Reddy’s Laboratories with a target price of Rs 5214. The share price moved up by 8.74 per cent from its previous close of Rs 4826.60. The stock’s last traded price is Rs 5248.40.

Dr. Reddy’s Laboratories Ltd. key Products/Revenue Segments include Pharmaceuticals which contributed Rs 10466.70 Crore to Sales Value (98.50 % of Total Sales), Licence Fees which contributed Rs 55.90 Crore to Sales Value (0.52 % of Total Sales), Service Income which contributed Rs 50.30 Crore to Sales Value (0.47 % of Total Sales), Spent Chemicals which contributed Rs 35.60 Crore to Sales Value (0.33 % of Total Sales), Scrap which contributed Rs 16.10 Crore to Sales Value (0.15 % of Total Sales) and Other Operating Revenue which contributed Rs .90 Crore to Sales Value (0.00 % of Total Sales)for the year ending 31-Mar-2019.

For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 4417.50 Crore, down 0.32 % from last quarter Sales of Rs 4431.80 Crore and up 14.93 % from last year same quarter Sales of Rs 3843.60 Crore Company has reported net profit after tax of Rs 586.90 Crore in latest quarter.


Investment Rationale
The brokerage has raised FY23 revenue/EPS estimates by 7.8/38.0% to factor in Revlimid launch. It maintains ADD rating with revised target price of Rs 5,214/share (earlier: Rs4,713) based on 25xSep’22E base business EPS and Rs514/share for Revlimid. Key downside risks: Delay in launch of key products in US and regulatory hurdles.

Promoter/FII Holdings
Promoters held 26.7 per cent stake in the company as of June 30, 2020, while FIIs held 29.5 per cent, DIIs 14.5 per cent and public & others 29.3 per cent.