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  • 22 Jun 2022
  • ICICIdirect Research

DR REDDY’S GUIDES FOR HORIZON 2 BUSINESS INVESTMENTS IN INVESTOR MEET

News: Dr Reddy’s is looking to leverage Horizon 1 business growth levers and drive productivity to invest in Horizon 2 businesses. The management defined Horizon 1 as core drivers in short to medium term mainly comprising of 1) Generics, 2) API, 3) Branded Generics, 4) OTC and 5) Biosimilars while Horizon 2 as driver in short to long term mainly comprising of 1) Immuno-Oncology NCEs, 2) Biologics and CGT, 3) Nutraceuticals, 4) CDMO (small and large molecules), 5) Disease management, 6) D2C and 7) Digital services. Company aspires to 1) maintain double digit sales growth, 2) 25% EBITDA margin profile and 3) 25% RoCE, while keep investing in Horizon 2 opportunities for future

Views: Dr Reddy’s has embarked upon next phase of strategy in alignment with changing context in Industry and emerging opportunities and trends. In context of Horizon 2, Dr Reddy’s will look to scale up in Immuno-Onco NCEs, Nutraceuticals and CDMO while invest to enter in new areas of Biologics and Cell gene therapy, Differentiated formulations, Disease management and Preventive & Primary care platform SVAAS. The investments in Horizon 2 are likely to contribute ~ 15% to top-line by FY27. Although in near to medium term, investments are expected to rise by 50-100 bps and subsequently amid near term industry wide challenges, margins are likely to contract. Complex US launches like gRevlimid later in the year is likely to ease the near term margin pressure. Dr Reddy’s has leveraged its existing portfolio across global markets and has strong balance sheet to invest in future growth

Impact: Positive