Dr. Reddy’s: Systematix Recommends 'Sell' On The Stock After Q3 Results — Here's Why

Dr. Reddy’s SG&A and research and development spend has increased almost 50% over the last two years as the company is in the early stages of its investment in the new growth platforms: consumer healthcare, biosimilars and contract development and manufacturing organisation..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .Systematix Research Report.Dr. Reddy’s Laboratories Ltd.'s Q3 FY25 revenue was broadly inline (up 16% YoY and 4.3% QoQ) but Ebitda and net earnings (adjusted for one time milestone income – Rs 1200 million) were lower by 8% and 13% versus our expectations. During the quarter company integrated the acquired nicotine replacement therapy portfolio, which added about 800bps to revenue growth. Excluding NRT, YoY revenue growth stood at 7.5%, led by strong performance in EU, India and other emerging markets. EU growth (22% YoY) was led by new launches, whereas India growth (14% YoY) was led by contribution from inlicensed vaccine portfolio from Sanofi, new launches, and price increase. North America sales disappointed and was lower 9% QoQ. Dr. Reddy’s selling, general and administrative spend was also higher during the quarter (29% of sales) due to NRT business, branding initiatives, and scaleup in consumer health business. Dr. Reddy’s SG&A and research and development spend has increased almost 50% over the last two years as the company is in the early stages of its investment in the new growth platforms: consumer healthcare, biosimilars and contract development and manufacturing organisation. R&D spend is being utilized on complex generics, peptides, biosimilars, and new chemical entity oncology. We expect these new business avenues to take a few years before they start contributing profitably to the consolidated performance. However, currently these investments in new businesses are meaningfully diluting the reported earnings of the company. We revise our estimates on Dr. Reddy's and arrive at target price of Rs 1,060, based on 30 times FY27E EPS. At current market price, we recommend a Sell on Dr. Reddy's..Click on the attachment to read the full report:.Dr. Reddy's Laboratories Q3 Results: Profit Rises 2%, But Misses Estimates.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Dr. Reddy’s: Systematix Recommends 'Sell' On The Stock After Q3 Results — Here's Why

The brokerage expects Dr. Reddy's new business avenues to take a few years before they start contributing profitably to the consolidated performance.

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