Dr Reddy’s (Q1 FY14)

India Infoline News Service | Mumbai |

Implementation of the new Pricing Policy (DPCO 2013) led to destocking in the trade coupled with the Maharashtra trade strike had an adverse effect on the revenues for this quarter.

CMP Rs2,217, Target Rs2,600, Upside 17.2%
 
  • Revenue growth of 12% yoy to Rs28.5bn was below our expectation led by lower than expected growth in PSAI segment

  • Global Generic business advanced by 14.9% yoy and declined by 3.2% qoq to Rs21.9bn

  • Domestic revenues remained flat on yoy and qoq to Rs3.5bn

  • The US business advanced by 37.3% yoy to Rs10.8bn whereas Europe de-grew by 27.8% yoy and 14% qoq to Rs1.6bn

  • PSAI segment reported poor performance after continuum robust performance in last three quarters. The segment de-grew by 42.3% qoq while remained muted yoy (+6.2% to Rs5.9bn)

  • Operating margin at 20.3% was lower than our estimate of 21% on the back of higher R&D expenses; even product mix impacted the margin

  • Adjusted PAT was up by 11.6% yoy to Rs3.7bn; Reported PAT at Rs3.6bn was above below our estimate of Rs4.2bn

  • We maintain our BUY rating with a revises target price of Rs2,600

Result table
(Rs mn)
Q1 FY14
Q1 FY13
% yoy
Q4 FY13
% qoq
Net sales
28,449
25,406
12.0
33,399
(14.8)
(Inc)/dec in stock
(1,188)
(1,234)
(3.8)
1,078
(210.1)
Con of Materials
(9,439)
(9,028)
4.6
(10,300)
(8.4)
Other Expenditure
(5,178)
(4,072)
27.2
(5,176)
0.0
Gross Profit
15,019
13,541
10.9
16,845
(10.8)
SG&A Expenses
(7,181)
(6,982)
2.8
(7,227)
(0.6)
R&D Expenses
(2,430)
(1,564)
55.4
(2,326)
4.5
Other (Inc)/Expen
(376)
(219)
71.9
(1,631)
(77.0)
Operating profit
5,785
5,213
11.0
8,922
(35.2)
OPM (%)
20.3
20.5
(19) bps
26.7
(638) bps
Dep & Amort
(1,613)
(1,296)
24.5
(1,495)
7.9
Net Interest income
(70)
(212)
(67.0)
397
(117.6)
Other income
36
19
86.8
26
38.1
PBT
4,137
3,725
11.1
7,850
(47.3)
Tax
(528)
(365)
44.6
(2,142)
(75.4)
Effective tax rate (%)
12.8
9.8
296 bps
27.3
(1452) bps
Reported PAT
3,609
 

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