Stock Market Update on Dr. Reddy’s Laboratories for 1QFY2012 with a Buy recommendation and a Target Price of `1,920 (12 months)
Dr. Reddy’s Laboratories (DRL) reported higher-than-expected 1QFY2012 results. Net sales increased by 17.5% yoy, led by 21.0% yoy and 7.4% yoy growth across the global generics and proprietary products businesses, respectively. Net profit during the quarter, however, came higher than our estimates, on account of lower tax provision during the quarter as compared to our expectation. Overall net profit grew by 25.1% yoy to `262cr (`210cr). DRL has reinforced its FY2013 guidance of US$2.7bn, with RoCE expected to come in at 25%. We maintain our Buy recommendation on the stock.
Good set of numbers: DRL reported net sales of `1,978cr (`1,683cr) in 1QFY2012, growth of 17.5% yoy, which was higher than our estimates of `1,851cr. The US market reported strong growth of 47.4% yoy, led by higher market share in its key markets. Sales from Russia grew by 18.3% yoy. The domestic market reported single-digit growth of 5.7% yoy.
Outlook and valuation: DRL has reinforced its earlier revenue guidance of US$2.7bn by FY2013E with RoCE of 25%. We expect net sales to report a 13.3% CAGR to `9,584cr and adjusted EPS to record a 22.7% CAGR to `96.0 over FY2011–13E. We maintain our Buy recommendation on the stock with a revised target price of `1,920.
