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Prabhudas Lilladher Report
Dr. Reddy's Laboratories Ltd.'s Q3 FY24 Ebitda was largely in-line with our estimate. Though base business margins and U.S. sales ex of Revlimid and production linked incentive incentives may have improved QoQ; it has been quite volatile in the past and sustainability is key.
Further thin U.S. pipeline in near term 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 25 times price/earning on FY26E adjusted for gRevlimid.
We maintain our ‘Reduce' rating with revised target price of Rs 5,650/share (Rs 5,300 earlier) as we roll forward; valuing at 24 times FY26E earnings per share for base business.
Any big ticket acquired new drug application approvals and sharp recovery in base business margins are key risks to our call.
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