Dr Reddy’s falls 9% in two days on disappointing Q1 results: 28 Jul 2017

Dr. Reddy

Dr Reddy’s Laboratories dipped 6% to Rs 2,470, extending its previous day’s 3% decline on BSE, after the company reported disappointing set of numbers for the quarter ended June 2017 (Q1FY18).

The consolidated net profit for the pharmaceutical company more- than-halved to Rs 59 crore in Q1FY18 against Rs 126 crore in the same quarter year ago. Revenue during the quarter under review grew 3% to Rs 3,316 crore from Rs 3,235 crore in year ago quarter.

Analysts on an average had expected profit of Rs 307 crore on revenues of Rs 3,399 crore for the quarter.

“Our first-quarter results have been below expectations. While headwinds in the form of price erosion due to US customer consolidation continue a lower contribution from new product launches in the US and the GST implementation in India also impacted our performance,” Dr Reddy’s Co-Chairman and Chief Executive Officer GV Prasad said.

“We are yet to see the full impact of the genericization; however, launch of gVytorin, gAngiomax, and gDoxil along with a recovery in the domestic business should halt a slide in margins. On the regulatory front, we continue to believe that Srikakulam woes may be resolved by the year-end; however, Bachupally’s Form 483 remain a overhang given that it generates >50% of the US topline, in our view,” analysts at Antique Stock Broking said in Q1 results review and reduce target price to Rs 2,700.

Analysts at Emkay Global Financial Services, maintain HOLD rating, see some rebound in earnings across the generic space, especially FY19 onwards, simply due to the high R&D spend and pent up pipelines. However there remain longer term apprehensions on the structural dynamics of the generic business.

At 9:45 am; the stock was trading 5.5% lower at Rs 2,478 on BSE, as compared to 0.56% decline in the S&P BSE Sensex. It hit a 52-week low of Rs 2,382 on May 29, 2017 on BSE in intra-day trade.

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