Dr Reddy’s Q2 Results: A Detailed Analysis

Dr Reddy’s Laboratories Ltd.’s profit in the second quarter of this financial year rose 7.3% to Rs 1,347 crore in the quarter ended September. This is in comparison to a profit of Rs 1,256 crore in the same quarter of the previous fiscal, according to its stock exchange notification on Friday.

Revenue and Operating Income

Revenue rose by 9.8% year-on-year for the three months ended September, reaching Rs 8,828 crore. Operating income, or earnings before interest, taxes, depreciation, and amortisation, fell 3.2% year-on-year to Rs 2,010 crore. The Ebitda margin contracted to 22.8%.

The key highlights of the Q2 results are:

• Net Profit up 7.3% at Rs 1,347 crore versus Rs 1,256 crore
• Revenue up 9.8% at Rs 8,828 crore versus Rs 8,038 crore
• Ebitda declines 3.2% at Rs 2,010 crore versus Rs 2,077 crore
• Margin at 22.8% versus 25.8%

Segment-Wise Performance

According to the company’s press release, growth in Q2 was driven by momentum in branded markets and steady contributions from the Nicotine Replacement Therapy (NRT) portfolio, which helped offset the decline in U.S. Lenalidomide sales.

Co-Chairman & MD, G V Prasad, stated, “Growth in Q2 was driven by momentum in branded markets and steady contributions from the Nicotine Replacement Therapy (NRT) portfolio, which helped offset the decline in U.S. Lenalidomide sales.”

While Dr Reddy’s North America revenue fell 13% to Rs 3,240 crore due to loss of sales in Revlimid, its Indian business rose 13% in comparison to the previous year to Rs 1,580 crore.

The pharma company’s Europe business grew 138% year-on-year, the company said in a press release on Friday. The growth in Europe business was led by revenues from the acquired NRT portfolio. Emerging markets revenue for the quarter ended September rose 14% year-on-year to Rs 1,650 crore.

Stock Market Reaction

The quarterly earnings were shared after market hours. The stock settled 0.33% higher at Rs 1,283.60 apiece on the NSE, compared to a 0.37% decline in the benchmark Nifty 50.

Dr Reddy’s shares have fallen 2.50% in the last 12 months and 7.55% year-to-date.

Out of 40 analysts tracking the company, 16 maintain a ‘buy’ rating, 10 recommend a ‘hold’ and 14 suggest ‘sell’, according to Bloomberg data. The average 12-month consensus price target of Rs 1,311.76 implies an upside of 2.2%.

What’s Next for Dr Reddy’s?

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