Dr. Reddy's - U.S., Europe Drive Growth: Nirmal Bang

Nirmal Bang Report

We hosted the management of Dr. Reddy’s Laboratories Ltd. to gain insights into the current business outlook. New launches in the U.S. and the Europe are expected to drive growth going ahead.

Growth in the U.S. is being led by both, the base business as well as limited volume products, with a mix of complex and non-complex filings. For the Emerging Markets, Dr. Reddy’s strategy is to focus on brand building and leveraging products developed for the U.S. and Europe.

In India, emphasis is on core business and innovation in three areas: innovative assets, consumer health and digital. We like Dr. Reddy's management’s strategic decision-making ability and its enhanced focus on the Branded business.

The company has acquired Meno Labs in the U.S., which will complement its Wellness and Healthcare portfolio. It has also formed a joint venture with MNCs like Sanofi (vaccine), Bayer (cardiac) and Nestle (nutraceuticals).

Strong growth is expected in the generic segment in the near term in the U.S. business on the back of new launches and stable base business performance. We also like the management’s decision of focusing on Branded Generics and JVs with MNCs.

We maintain our Buy rating on Dr. Reddy's with a revised target price of Rs 8,519, valuing it at 24 times PE on FY26E base EPS of Rs 345 and net present value of Rs 229 for the Revlimid opportunity.

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