Dr Reddy's Laboratories Q3 Results: Profit Up 11%, In Line With Estimates

The drugmaker's net profit increased to Rs 1,381 crore in the October to December quarter.

<div class="paragraphs"><p>Dr Reddy's Laboratories building (Source: Company)</p></div>
Dr Reddy's Laboratories building (Source: Company)

Dr. Reddy’s Laboratories Ltd.'s profit rose 11% in the third quarter of fiscal 2024, in line with analysts' estimates.

The drugmaker's net profit increased to Rs 1,381 crore in the October to December quarter, according to an exchange filing on Tuesday. That compares with the Rs 1,313-crore consensus estimate of analysts tracked by Bloomberg. Sequentially, the profit fell 7%.

Dr Reddy's Q3 FY24 Earnings Highlights (YoY)

  • Revenue rose 7% to Rs 7,237 crore (Bloomberg estimate: Rs 6,982 crore).

  • Ebitda up 4% to Rs 2,034 crore (Bloomberg estimate: Rs 1,984 crore).

  • Ebitda margin at 28.1% versus 28.7% (Bloomberg estimate: 28.4%).

"We delivered another quarter of highest-ever sales and robust financial performance aided by new products performance and base business market share gain in the U.S., new products launch momentum and strong performance in Europe," Managing Director GV Prasad said in the filing.

Other Highlights (YoY)

  • Revenue from the mainstay North American market rose 9%, contributing 46% of the total sales. "Growth was on account of market share expansion in certain existing key products and revenues from new product launches, partly offset by price erosion."

  • Four new products were launched in the North American region in the December quarter.

  • European business rose 15%, accounting for 7% of the revenue. The company launched six new products in the region.

  • India revenue was up 5%, contributing 16% to the total revenue for the quarter.

  • Emerging market sales declined 2%, making up 18% of the revenue for the quarter. Of this, Russia reported a year-on-year sales decline of 14%, due to unfavourable currency exchange rate movements and high base business.

  • The segment of pharmaceutical services and active ingredients grew 1%. It made up 11% of the total revenue.

  • Expenditure on selling, administration and distribution rose 12% to Rs 2,020 crore.

  • Research and development expenses stood at 7.7% of revenue.

  • The company had a net cash surplus of Rs 5,910 crore, as of Dec. 31.

Business Updates

  • The company acquired the MenoLabs branded portfolio of women's health-focused supplements in the U.S.

  • It entered into an exclusive collaboration with Coya Therapeutics for development and commercialisation of COVA 302. The drug is for the treatment of Amyotrophic Lateral Sclerosis (nervous system disease that weakens muscles).

  • With regards to the update on Rituximab, the company's first biosimilar filed from its Bachupally facility—for which the company had received nine observations on pre-approval inspection—the filing disclosed that the response was submitted within timelines. No further update on the same was provided.

  • The company has approved a fund infusion of Rs 650 crore in one or more tranches by way of equity shares in its wholly owned subsidiary, Aurigene Oncology Ltd.

  • The company disclosed that it will also make a similar investment in equity shares of Aurigene Pharmaceutical Services Ltd., a step-down wholly owned subsidiary of the company, to support the capex and working capital requirements.

  • Dr Reddy's has also approved voluntary liquidation of Imperial Owners and Land Possessions Pvt., another wholly owned subsidiary. Imperial had a net worth of Rs 2.6 crore and revenue of Rs 14.7 lakh. "Imperial is not a material subsidiary of the company...liquidation of Imperial will not have any significant impact on the company or its financials," the company disclosed in its filing.

Management Comments

MV Ramana, chief executive officer (branded markets), India and emerging markets, told NDTV Profit that he expects the U.S. business to continue growing in high-single digits.

He said that the acquisition of MenoLabs' branded portfolio is in line with their consumer health strategy in the U.S. This and the collaboration with Coya, along with the company's plan to launch around 25 new products each year in the U.S. is expected to help their U.S. business beyond generics.

In terms of the muted performance in India, Ramana said India business will get back to double-digit growth. The company has identified three levers—access to innovative assets, consumer health and digital initiatives—apart from growing their base business. "These three levers should help propel India business among the top five in the country."

He has maintained the 25% Ebidta margin guidance for the company.

Shares of Dr Reddy's closed 0.03% higher at Rs 5,845.75 apiece on the BSE, as compared with a 1.11% decline in the benchmark Sensex.

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