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Dr Reddy's Laboratories numbers in line; launches in FY23 likely drivers

ICICI Securities 03 Feb 2022

What’s Buzzing:

Dr Reddy's Laboratories' revenues and margins were in line with I-direct estimates primarily driven by new launches and higher sales volume being partially offset by price erosion in base business.

Context:

Revenues in Q3 grew 8% YoY to Rs 5338.3 crore (I-direct estimate: Rs 5341.9 crore) driven by 45.6% YoY growth in RoW market to Rs 440 crore (I-direct estimates of Rs 332.5 crore) and 7.6% growth in Russia & CIS markets to Rs 710 crore (I-direct estimates of Rs 726 crore). US revenues grew 7.2% YoY to Rs 1864.5 crore (I-direct estimate: Rs 1891.4 crore) on the back of new launches and increase in base business volume. India business grew 7% YoY to Rs 1026.6 crore (I-direct estimate: Rs 1045.4 crore) driven by price hike in existing products and new launches while Europe revenues declined 2.1% YoY to Rs 405.8 crore (I-direct estimate: Rs 447.4 crore) amid price erosion in some products being partially offset by new launches. PSAI segment posted growth of 3.7% YoY to Rs 727.1 crore (I-direct estimate: Rs 785 crore). EBITDA margins improved 1186 bps to 22.8% (I-direct estimate of 22.6%) due to lower employee and other expenses. Subsequently, EBITDA grew 125.4% YoY to Rs 1215.7 crore (I-direct estimate: Rs 1205.9 crore). [Note: Base of Q3FY21 had Rs 597.2 crore impairment cost]

 Our perspective:

The management remains committed to working on cost rationalisation, especially on the SGN&A front and calibrating R&D spend more towards Global Generics front, biosimilars and lower towards proprietary products. Key growth drivers in the near term would be key launches across geographies besides continuing growth momentum in Global Generics, especially in India and Russia.

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