Dr Reddy’s shares: Should you buy the pharma stock as Q3 net profit rises 77%?

Brokerages on Dr Reddy’s shares post Q3 results –

“Dr Reddy offers long-term potential with several complex molecules in its pipeline and potential China opportunity. However, ex-Revlimid US growth will face execution challenges in the face of price erosion and competition in existing molecules. We note biosimilar R&D efforts, but are cautious on its long-term potential. We raise our consol. FY24E/25E EPS by 13%/12% due to higher-than-expected gRevlimid, but keep core EPS unchanged. Retain ‘HOLD’ with a target price of ₹4,675,” said Edelweiss.

“Dr Reddy’s reported a strong Q2 result beating our and consensus estimates due to higher than expected sales from gRevlimid. The overall revenue was driven by gRevlimid. Adjusted gross margin at 58.6% supported by gRevlimid that led to healthy adj. EBITDA margin of 29.7% years. We believe Ex-gRevlimid, core EBITDA margin was around 21-22%. We expect normalized EBITDA margins (~25%), backed by new launches, ramp-up in the US, and sable growth in India EM. We maintain BUY, with a revised of a target price of ₹4,880,” said brokerage Centrum.

“Despite recent sub—par core business performance, DRL’s near-medium term outlook remains healthy driven by guidance of 30 new launches in US (and no major regulatory overhang), strong growth outlook in India (aided by recent deals), recovery in PSAI and continued scale-up in RoW formulations. This will be backed by likely strong gRevlimid contribution over FY23-FY26E. Strong balance sheet and cash flows backed up by willingness to make acquisitions is another trigger. Maintain Buy* with a target price of ₹4,825,” as per DAM Capital.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.