The company said that the jump in YoY net profit was largely driven by growth in global generics revenues in North America as well as emerging markets. DRL’s revenue also increased 12% YoY to Rs 7,083 crore.
However, on a quarter-on-quarter basis, the net profit was down 5% and revenue dropped 2%. The EBITDA margin was down by 290 basis points.
Here’s what brokerages said about the performance of the company:
JP Morgan
JP Morgan stated that DRL’s revenues were in line with the estimates, however, margins were a miss. The US market was softer than expected while the Indian market surprised positively. It is anticipated that the Nestle JV is likely to contribute by FY27.
With limited visibility on the pipeline, the brokerage maintained its ‘underweight’ rating on the stock and cut the target price to Rs 5,170.
Motilal Oswal
“After delivering 30% YoY earnings growth in FY24, we expect earnings growth to moderate to a 3.5% CAGR over FY24-26, partly due to a gradual build-up of market share of g-Revlimid. The investment in the JV with Nestle and in the biosimilar segment should give commercial benefits after FY26. We believe that the valuation adequately factors in the upside in earnings,” said a report by Motilal Oswal.
The brokerage maintained its ‘neutral’ rating with a target price of Rs 6,258.
Kotak Institutional Equities
DRL delivered a subdued 4QFY24, which was much lower than Kotak’s estimates, which was driven by lower gRevlimid sales, muted growth across markets and higher R&D spends. KIE also highlighted that a further pick-up in base domestic growth and profitability will be critical in the post-gRevlimid era for the company.
KIE has a ‘reduce’ rating on the stock with a target price of Rs 5,935 as they believe that the stock is fairly priced.
Nuvama
Nuvama reckons that the core business EBITDA margin (ex-gRevlimid) corrected 200–300bp YoY to 17%, which implies a weakness in base profitability. DRL’s complex product R&D coupled with weakness in the domestic business may keep base profitability tepid while growth initiatives (biosimilar, Nestle JV) would kick in beyond FY27.
Nuvama recommended a ‘reduce’ rating for the stock with a target price of Rs 5,028.
Prabhudas Lilladher
“Dr. Reddy’s (DRRD) Q4FY24 EBITDA was 6% below our estimate led by higher R&D spend. The base business margins and US sales ex of Revlimid and PLI incentives continued to remain weak. Further thin US pipeline in near term and competition in certain key products remains a key risk. Our FY25 and FY26E EPS broadly remains unchanged,” said a report by Prabhudas Lilladher.
They have maintained a ‘reduce’ rating for DRL while sharing a target price of Rs 5,700.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
