Dr Reddy's share prices tanked more than 6% on Thursday's early trade after the posted overall decent Q4FY23 numbers, but missed the street's estimates. Dr Reddy's shares were trading at Rs 4,560 apiece on NSE at 10:45 am.
Dr Reddy's Laboratories reported 11-fold surge in consolidated net profit at Rs 959.20 crore for the March quarter compared with Rs 87.50 crore in the same quarter last year.
Dr Reddy's revenue for the quarter rose 16% to Rs 6,296.80 crore compared with Rs 5,436.80 crore in the corresponding quarter last year. EBITDA for the quarter came in at Rs 1,631 crore, up 26% YoY.
According to brokerage firm Prabhudas Lilladher, Dr Reddy’s (DRRD) Q4FY23 reported profitability was in line with their estimate. However, adjusted for one-time divestment income (Rs2.65bn), EBITDA was 20% below the estimates impacted by lower GMs and higher overheads.
PL reduced its FY24E and FY25E EPS by 10% and 6% as they factor in lower margins ex of gRevlimid. The brokerage downgraded Dr Reddy's stock to 'Reduce' from 'Buy' with a revised target price of Rs 4,500 per share, down from Rs 4,900 earlier.
"At CMP, DRRD is trading at expensive valuations of 24x P/E on FY25E adjusted for gRevlimid. Any big-ticket ANDA approvals and sharp recovery in base business margins are key risks to our call," said Prabhudas Lilladher on Dr Reddy's stock.
According to analysts at Motilal Oswal Financial Services (MOFSL), while Dr Reddy's delivered 39% YoY earnings growth in FY23, they expect moderation in the earnings CAGR to 3.6% over FY23-25 due to a high base of FY23 and limited visibility of potential products to deliver growth over the next two years.
"We believe the valuation already factors in the earnings upside, hence we maintain our Neutral rating on the stock," Motilal Oswal said on Dr Reddy's stock. The brokerage has set Dr Reddy's share price target at Rs 4,500.
Brokerage firm Nuvama has also downgraded Dr Reddy's to 'Reduce', slashing its target price by 10% to Rs 4,200. Goldman Sachs also has a 'Neutral' call with a price target of Rs 4,750.
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