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Dr Reddy's: India, Russia and RoW markets drives Q2 growth

News: Revenues grew 17.8% YoY to Rs.5786.9 crore (I-direct estimate: Rs.5233.8 crore) mainly due to 93.5% YoY growth in RoW market to Rs.510 crore (I-direct estimates of Rs.303.1 crore) and 31.7% growth in Russia & CIS markets to | 790 crore (I-direct estimates of Rs.672 crore). US revenues were muted to Rs.1890.9 crore (I-Direct estimate: | 1859.4 crore). Europe revenues grew 10.1% YoY to Rs.413.5 crore (I-Direct estimate: Rs.431.7 crore) while India business grew 25% YoY to Rs.1140.2 crore (I-Direct estimate: Rs.1106.6 crore). PSAI segment was flat at Rs.837.2 crore (I-Direct estimate: Rs.765.5 crore).  EBITDA margins were at 23.5% (I-direct estimate of 19.6%) due to lower employee expenses. Gross margins declined 286 bps YoY to 65% on account of price erosion and lower export benefits partially offset by leverage benefit on manufacturing overheads. Subsequently, EBITDA grew 17.6% YoY to | 1359.8 crore, way higher than I-direct estimate of Rs.1025 crore. Net profit grew 29.0% YoY to Rs.995.8 crore (I-direct estimate: Rs.602 crore), mainly due to better operational performance and higher margins.

Views: The management remains committed to working on cost rationalisation, especially on the SGN&A front and calibrating of 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.