Dr. Reddy's Q4 Results Review - Ebitda Miss; Limited Visibility On U.S. Pipeline: Prabhudas Lilladher

Prabhudas Lilladher Report

Dr. Reddy’s Laboratories Ltd.'s Q4 FY24 Ebitda was 6% below our estimate led by higher research and development spend. The base business margins and U.S. sales ex of Revlimid and production linked incentive incentives continued to remain weak.

Further thin U.S. pipeline in near term and competition in certain key products remains a key risk.

Our FY25 and FY26E EPS broadly remains unchanged. At current market price, Dr. Reddy's is trading at expensive valuations of 27 times price/earning on FY26E adjusted for gRevlimid.

We maintain our ‘Reduce’ rating with target price of Rs 5,700/share; valuing at 25 times FY26E EPS for base business. Any big ticket abbreviated new drug application approvals and sharp recovery in base business margins are key risks to our call.

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