Dr Reddy's shares zoom over 8% post Q4 results; brokerages see more upside 

Shares of Dr. Reddy’s Laboratories (DRL) zoomed over 8 per cent to hit an intraday high of Rs 4259.1 on BSE a day after the company announced the results for the quarter ended March 2022. 

The company posted a net profit of Rs 88 crore, down 76 percent on a year-on-year basis as it booked one-time impairment expenses of Rs 742 crore in the last quarter. However, it reported a 15 per cent year-on-year rise in revenues from operations to Rs 5,437 crore. 

With a market capitalisation of more than Rs 70,000 crore, the shares stand higher than 5-day, 20-day and 50-day moving averages but lower than 100-day and 200-day moving averages. 

Axis Securities said that Dr Reddy Q4FY22 reported revenue growth of 14.8 per cent YoY, led by strong performance in geographies such as the US, India, and emerging markets. 

It added that DRL is currently investing in various businesses that may provide excellent growth in the long term. The company is building a global pipeline of biosimilars, developments of NCE for Immuno-oncology, and building up a Neutraceuticals portfolio, vaccines, CDMO, and digital healthcare platforms. 

"However, high inflation could decrease margins prompting us to reduce target price to Rs 4,500/share," the brokerage added. 

"Dr Reddy’s (DRRD) Q4FY22 US and India revenues were healthy. We continue to expect steady earnings momentum and pick up in US generic business along with cost optimization. Also, strong pipeline/new launches will drive steady growth in India and RoW markets," said Prabhudas Lilladher. 

"We expect 13 per cent EPS CAGR over FY22-24E (ex of Revlimid) and broadly maintain our estimates at ‘Buy’ rating with a revised target price of Rs 4,900 per share. At CMP, DRRD is trading at 17.5x P/E on FY24E adjusted for gRevlimid," it said. 

"We assign 22x (23x earlier) FY24E EPS plus Rs250/share for gRevlimid NPV. Delay in key ANDA approvals and prolonged inflationary environment of raw material prices are key risks to our call," the brokerage house added. 

ICICI Securities expects growth momentum in branded generics business and new launches in US in coming quarters to continue. 

"DRL’s current valuations of 16.6x FY23E and 13.8x FY24E EPS remain attractive. We retain 'BUY' with a revised SOTP-based target price of Rs 4,925/share (prior: Rs 5,359/share)," the brokerage house added.