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Dr. Reddy’s Laboratories Ltd Q1 Results Fy22-2023

29 July 2022

Pharmaceutical giant Dr. Reddy’s Laboratories posted its Q1 FY23 results on July 28, 2022. The company reported a whopping 97% YoY (Year on Year) increase in its consolidated PAT (Profit After Tax) which came in at Rs 1,188 crore for the quarter under review from Rs 570 crore in the year ago period. The PAT was up by a mammoth 490% QoQ from Rs 87 crore in the previous quarter.

This may however be a one-off event. The sharp increase in the PAT on both YoY and QoQ basis is attributed to Dr. Reddy's Labs receiving a one-time ‘other income’ worth Rs 602 crore. This includes:

  1.  Rs 90 crore from the sale of brands Z&D, Pedicloryl, Pecef and Ezinapi to J B Chemicals and Pharmaceuticals Limited
  2.  Rs 139 crore from the sale of brands Styptovit-E, Finast, Finast-T and Dynapres to Torrent Pharmaceuticals Limited
  3.  Settlement worth Rs 563 crore with Indivior Inc., Indivior UK Limited and Aquestive Therapeutics, Inc.

On a YoY basis, the revenue of the company was up 6% at Rs 5,215 crore from Rs 4,919 crore in the year ago period. However, on a sequential basis, Dr. Reddy’s Laboratories’ revenue was down 4% from Rs 5,436 crore in the previous quarter. Gross profit margin was recorded at 49.9%, down 230 base points from the previous year and by 300 base points sequentially. As per management, the decline is primarily on account of higher commodity prices, adverse leverage on manufacturing overheads, price erosion and forex-related impact. However, the company partially benefitted from the one-off brand divestment it undertook in the quarter that offset some of the crunch.

Dr. Reddy’s total Global Generics business grew nearly 8% YoY to Rs 4,432 crore from Rs 4,111 crore in the year ago period, but dipped 4% QoQ against the Rs 4,611 crore reported in the previous quarter. The global generics business in North America contracted the most (11% QoQ), while it grew 38% QoQ in India. Global generics business in Emerging Markets also saw a contraction of 25% QoQ.

Dr. Reddy’s scrip closed in the red at Rs 4,260.05 per share after taking a dip of 0.61% after the end of the intraday trading session on July 28, 2022 ahead of the company’s quarterly results.

Hits

  • PAT up 97% YoY, 490% QoQ to Rs 1,188 crore from Rs 570 crore in the year ago period and Rs 87 crore in the previous quarter
  • Revenue up 6% YoY to Rs 5,215 crore from Rs 4,919 crore in the year ago period
  • Dr. Reddy’s total Global Generics business grew nearly 8% YoY o Rs 4,432 crore from Rs 4,111 crore in the year ago period

Misses

  • The company’s gross margin came in at 49.9% from 52.2% in the year ago period and 52.9% in the previous quarter.

Segment-wise revenue

  • Pharmaceutical services and active ingredients: Revenue down 8% YoY to Rs 813 crore from Rs 886 crore in the year ago period
  • Global generics: Revenue up 7.8% to Rs 4,432 crore from Rs 4,111 crore in the year ago period
  • Others: Revenue up 36.7% YoY to Rs 74 crore from Rs 54 crore in the year ago period

What the Management says

Commenting on the results, Co-Chairman & MD, G V Prasad said "Our underlying business revenues adjusted for covid products contribution during last year have grown well. The profits were aided by a few non-recurring incomes, offsetting the near-term headwinds. We continue to improve the health of our core businesses through productivity improvement and robust product pipelines".

Other things to know about Bajaj Auto Ltd

  • Dr. Reddy’s P/E ratio is at 32.60 against the sector P/E ratio of 33.76.
  • The company’s P/B ratio is at 3.70 against the sector P/B ratio of 4.40
  • Dr. Reddy’s dividend yield is at 0.70% against the sector yield of 0.95%

To read the RA disclaimer, please click here
Research Analyst: Bavadharini KS

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