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Motilal Oswal Report
The acquisition of nine brands from Dr. Reddy's Laboratories Ltd. (sales: Rs 500 million for Rs 2.7 billion) is the third deal in the dermatology space over the past 12 months.
The valuation in terms of enterprise value/sales stands at 5.4 times /4.8 times for FY23/FY24. This is higher than its earlier acquisitions.
Given that the acquisition is funded through debt, we expect the deal to be earnings neutral over the medium term.
Although enhancing the derma portfolio is step in the positive direction, increased leverage could slightly dilute the return on capital employed over the medium term.
Having said this, we expect 16% earnings per share compound annual growth rate over FY23-25.
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