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Hold Dr. Reddy’s Laboratories, target price Rs 4550: Emkay Global

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Emkay Global has given a hold rating to Dr. Reddy’s Laboratories with a target price of Rs 4550. The share price moved up by 0.11 per cent from its previous close of Rs 4422.55. The stock’s last traded price is Rs 4426.90.

Dr. Reddy’s Laboratories Ltd., incorporated in the year 1984, is a Large Cap company (having a market cap of Rs 73472.28 Crore) operating in Pharmaceuticals sector.

Financials
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.


DRL-graph
Investment Rationale
DRRD is gradually regaining momentum in the US (with compliance issues behind now) and non-US geographies (increasing focus), which along with tight cost control will ensure strong earnings momentum over FY20-23 (+16% CAGR), strong FCF generation (Rs9.5bn in Q1 pre acquisition cost) and healthy ROCE (~23% in Q1). The brokerage is positive on the business but await better entry points, given the sharp outperformance in recent times. It retains Hold and EW in EAP.

Promoter/FII Holdings
Promoters held 26.8 per cent stake in the company as of June 30, 2020, while FIIs held 26.7 per cent, DIIs 29.3 and public and others 14.6 per cent

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