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Systematix Research Report
Dr. Reddy's Laboratories Ltd.'s Q1 FY24 revenue and earnings performance was significantly above expectations led by a sharp increase (26% QoQ) in North America sales on a QoQ basis. North America sales witnessed a rebound post a steep decline in Q4 FY23.
gRevlimid remains the key contributor for the U.S. business (about 30% of U.S. sales) and about 50% to the reported net earnings.
Other business segments except pharmaceutical services and active ingredients also posted healthy growth during the quarter. North America business contribution to overall Dr. Reddy's sales mix has increased to 47% of sales.
We have revised our earnings estimate on Dr. Reddy's considering the renewed intensity seen in gRevlimid but lower our price target multiple to 17 times to account for the high product concentration risk.
We retain our hold rating on the stock with a revised price target of Rs 5311.
The key upside risks to our forecasts being stronger than expected ramp up in China and high value limited competition complex generic approvals in the U.S.
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