Dr Reddy’s Q1 net up lower-than-expected 7% to Rs 361cr

Generic drugs maker Dr Reddy’s Laboratories ‘ first quarter net profit rose lower-than-expected 7 percent year-on-year to Rs 361 crore, sending shares down over 2 percent on Tuesday.

The Hyderabad-based company’s revenue in April-June also missed street expectations, gaining just 12 percent to Rs 2,845 crore.

Analysts on an average had expected Dr Reddy’s to report a net profit of Rs 421 crore, on revenues of Rs 3,127 crore, according to a CNBC-TV18 poll.

The company’s EBITDA rose 13 percent to Rs 570 crore and operating profit margin slipped 80 bps year-on-year to 14.6 percent, much lower than analysts expectation of 21 percent.

Dr Reddy’s said, research and development (R&D) expenses soared 55 percent to Rs 240 crore. R&D spends in Q1 were 8.5 percent of the company’s total revenue, up from 6.2 percent of revenue in the year ago quarter.

The company’s global generics business revenue rose 15 percent to Rs 2,190 crore. Revenue from North America increased 37 percent to Rs 1,090 crore, but emerging markets (Russia, CIS and rest of the world territories) revenue grew just 9 percent to Rs 600 crore. Russia in particular only saw 4 percent growth, which the company attributed to a high base effect and changes in the market stocking pattern.

Generic sales from Europe declined 28 percent to Rs 160 crore mainly due 26 percent decline in revenue from Germany.

India revenue was also flat at Rs 350 crore.

“Implementation of the new (drug) pricing policy, which led to destocking in the trade, coupled with the Maharashtra trade strike had an adverse effect on the revenue for the quarter,” Dr Reddy’s said.

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It launched two new products — Zoledronic Acid injection and Lamotrigine XL — in the US market in the quarter and filed 2 abbreviated new drug applications with the US Food and Drug Administration. The company now has 64 ANDAs pending approval with the US drug regulator.

Dr Reddy’s revenue growth in Pharmaceutical Services and Active Ingredients space also rose just 6 percent to Rs 590 crore.

The “muted growth was on the back of lower number of ‘launch molecules’ to our customers in the quarter,” it said.

Dr Reddy’s shares finally closed at Rs 2,177.25 on NSE, down near 2 percent.

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