NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
HDFC Securities Institutional Equities
Dr. Reddy’s Laboratories Ltd. is going to acquire Haleon’s global portfolio of consumer healthcare brands (Northstar Switzerland) in the Nicotine Replacement Therapy category outside of the U.S.
The proposed acquisition will be inclusive of all formats such as lozenge, patch, and gum as well as pipeline products. The total consideration of £500 million (upfront cash of £458 million and performance-based contingent payments of ~£42 million) implies 2.3 times enterprise /sales for CY23 (reported sales of £217 million in CY23 and ~4% CAGR over CY21-23).
The company expects the acquired business to be margin accretive (Ebitda margin at Dr. Reddy's level of ~25%). The company is looking to leverage market reach of Northstar for cross-selling of Dr. Reddy’s brands and geographical expansion.
We will factor the acquisition post-completion of the transaction, which is expected by Q3 FY25. We see the acquisition of OTC brands as strengthening Dr. Reddy’s consumer healthcare business (global consumer healthcare sales at ~$330 million, including US sales at ~$140 million); however, the acquired portfolio is a slow-growing business and with a steady Ebitda margin; on the proforma basis, the earnings per share impact would be ~2-3% in FY26.
Key concerns on the base business (ex-gRevlimid) growth remain, given increasing competition in key products in the US market.
We maintain Reduce with a target price of Rs 6,050 (25 times FY26E EPS + Rs 200/share from gRevlimid).
Click on the attachment to read the full report:
DISCLAIMER
This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.
RECOMMENDED FOR YOU
![](https://images.assettype.com/bloombergquint/2022-05/bcdf5e4e-757f-459f-b04b-2b48e3946a55/An_illuminated_keyboard__Photo_Lucas_Santos_Source_Unsplash_.jpg?rect=0%2C0%2C3500%2C1969&auto=format%2Ccompress&format=webp&w=75)
IT Services Q1 Results Preview - More Of The Same Is Good News: HDFC Securities
![timelogo](/images/amp-time.png)
![](https://images.assettype.com/bloombergquint/2022-11/13409bd3-9349-4dcc-9b96-49de08d85551/Close_view_of_capsules___Source_pxhere_com_.jpg?rect=0%2C0%2C3500%2C1969&auto=format%2Ccompress&format=webp&w=75)
Torrent Pharma - Focus On Branded Generics, Profitability: HDFC Securities
![timelogo](/images/amp-time.png)
![](https://images.assettype.com/bloombergquint/2022-05/e4f1ff66-9a46-48a8-811e-bd60f72bdb10/Handyman_prepare_cement_use_for_construction___freepik_.png?rect=0%2C0%2C3500%2C1969&auto=format%2Ccompress&format=webp&w=75)
Star Cement - In A Sweet Spot: HDFC Securities
![timelogo](/images/amp-time.png)
![](https://images.assettype.com/bloombergquint/2024-01/2b4d85d9-75ed-4c43-9a04-1fad5ad98b48/Dr__Reddy_s_2__1___1___1_.png?rect=0%2C0%2C3500%2C1969&auto=format%2Ccompress&format=webp&w=75)
Dr. Reddy's - Nicotinell Acquisition To Boost OTC Presence: ICICI Securities
![timelogo](/images/amp-time.png)