Dr. Reddy’s Q4 Results Review - U.S., India Drive Earnings Growth: Motilal Oswal

Motilal Oswal Report

Dr. Reddy’s Laboratories Ltd. delivered Q4 FY24 revenue in line with our estimate. However, Ebitda was lower than expected due to higher selling, general and administrative expenses and research and development spending.

In addition to U.S. generics/branded generics segments, Dr. Reddy's is enhancing its offering through joint ventures/partnerships/acquisitions in nutraceuticals, vaccine, women’s health and dietary supplement space. 

We maintain our earnings estimates for FY25/FY26. We value Dr. Reddy's on SOTP basis (22 times 12 months forward earnings for base business and Rs 90 per share for gRevlimid) to arrive at a target price of Rs 6,070. 

After delivering 30% YoY earnings growth in FY24, we expect earnings growth to moderate to a 3.5% compound annual growth rate over FY24-26, partly due to a gradual build-up of market share of g-Revlimid.

The investment in JV with Nestle and in biosimilar segment should give commercial benefits after FY26.

We believe that the valuation adequately factors in the upside in earnings. Maintain Neutral rating on the stock.

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