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Motilal Oswal Report
Dr. Reddy’s Laboratories Ltd. entered into a definitive agreement to acquire U.S. prescription portfolio from Mayne Pharma to enhance its offerings.
Basis sales of $110 million (for 12 months ending June 2022) implies enterprise value/sales of 1.2 times.
The acquired portfolio would increase U.S./consolidated sales by 9%/3% for Dr. Reddy's over FY23. Assuming company-level margins for this portfolio, we expect modest impact on the earnings (0.5% each for FY24/FY25).
Accordingly, we marginally upgrade our estimates for Dr. Reddy's, currently, this does not make a strong case for additional capital allocation for U.S. generics, given the severe continued price erosion at the industry level.
Further, we expect a moderate 5.7% earnings compound annual growth rate for Dr. Reddy's over FY23-25.
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