Dr. Reddy’s Laboratories

Dr. Reddy’s Laboratories Ltd. is a global pharmaceutical company headquartered in Hyderabad, India. Established in 1984, are committed to providing access to affordable and innovative medicines. Driven by our purpose of ‘Good Health Can’t Wait’, we offer a portfolio of products and services including APIs, generics, branded generics, biosimilars and OTC. Our major therapeutic areas of focus are gastrointestinal, cardiovascular, diabetology, oncology, pain management and dermatology. Major markets include – USA, India, Russia & CIS countries, China, Brazil and Europe. As a company with a history of deep science that has led to several industry firsts, we continue to plan ahead and invest in businesses of the future.

Key Business

• Generics
• OTC
• Branded Generics
• API
• BioSimilars

Shareholding Pattern

-PUBLIC GROUP

-PROMOTER GROUP

-Employee Trust

Financial Summary

Synopsis of Financials

• EBITDA: Reported at ₹2,160 crores ($259 million), a 15% QoQ growth and 1% YoY growth, with EBITDA margin at 28.2%.
• Profit After Tax: ₹1,392 crores ($167 million), with a net margin of 18.1%.
• Operating Working Capital: Increased to ₹11,555 crores ($1,387 million), up ₹262 crores ($31 million) from the previous quarter.
• Free Cash Flow: Generated ₹227 crores ($27 million), with a net surplus cash of ₹6,731 crores ($808 million).

Final Outlook

•India sales grew by 10.5% year-over-year to reach INR 11.3 billion, accounting for 16% of total sales.

•The gross margin increased by 330 basis points year-over-year to 58.6%.

• For the fourth quarter of FY24, the gross margins for global generics and PSAI improved by 60 basis points and 130 basis points, respectively, compared to the previous year.

• EBITDA rose by 34% year-over-year to INR 17.7 billion.

•Research and development expenses were INR 6.9 billion, representing 9.7% of sales.

•Underperformance in the India business was on account of lower base business volumes while the company launched 3 new brands in Q4FY24.

•Segment-wise, PSAI margins were 28.6%, down from 29.4% in Q3FY24, while generic margins were 62%, up slightly from 61.9% in Q3FY24.

•Reported EPS for the quarter is Rs. 78.4 and that for the year is Rs. 334 for FY 24.

Thin US pipeline in near term and competition in certain key products remains a key risk. Key risks include significant ANDA approvals and a sharp recovery in base business margins. Earnings growth to moderate to a 3.5% CAGR from FY24 to FY26, partly due to the gradual market share increase of g-Revlimid. The joint venture with Nestle and investments in the biosimilar segment are expected to yield commercial benefits after FY26.

HOLD the stock due to cautious about unstable core margins, reliance on one-time profit boosters like Production Linked Incentive (PLI) benefits, a slowdown in Indian operations, and regulatory uncertainties.