Dr Reddy's Q1 revenue may grow up to 10% YoY, margins may expand: Analysts

Dr Reddy's Labs Q1 results preview: Analysts said that despite pricing pressures in the US, the company is likely to have recorded steady growth in this segment due to a ramp-up of new products.

Notwithstanding the high base of last year impacted by Covid-19, steady sales growth, both domestically and in the US, is expected to help drug maker Dr Reddy's Laboratories post a decent topline in the April-June quarter (Q1FY23), said analysts.

The Hyderabad-based company is set to release its Q1FY23 results on Thursday, July 28. As per brokerage estimates, the company is likely to post yearly revenue growth of up to 10 per cent to Rs 5,337 crores.

Net profit, meanwhile, is estimated to rise by 12-37 per cent to Rs 687 crores over last year. Ebitda margins, too, are expected to increase sharply by as much as 589 basis points (bps) to 20-24 per cent on a low base of last year.

Analysts said that despite pricing pressures in the US, the company is likely to have recorded steady growth in this market due to a ramp-up of new products.

The domestic portfolio, on the other hand, may have possibly benefitted from the acquisition of Novartis' cardio brands in India. The company also enhanced its portfolio by adding branded and generic injectable products from Eton Pharmaceuticals in the US. 

Key parameters to watch include guidance on new product launches in the US and commentary on margins. 

Here is a breakdown of top brokerage expectations:

Sharekhan: The company is likely to stage healthy growth in its domestic business due to its acquired portfolio. The brokerage estimates a whopping 708.4 per cent rise in net profit over Q4 to Rs 784.1 crore. Topline, at Rs 5, 454.4 crore, may be driven by double-digit growth in domestic sales followed by high single-digit growth in US sales. Licensing income of $8 million may also drive revenues higher. Margin will expand due to the low base of last year and licensing income receipt.

ICICI Securities: The brokerage expects revenues to grow 8 per cent year-on-year (YoY) to Rs 5324.7 crore, mainly due to a 16 per cent growth in the US business to Rs 2,022.9 crore, which would be partially offset by a 7 per cent decline in domestic business to Rs 985.8 crore. Russia & CIS revenues likely grew 45 per cent YoY to Rs 710.5 crore, while rest of the world (RoW) markets likely fell 15 per cent to Rs 359.5 crore. Ebitda (earnings before interest, tax, depreciation, and amortisation) is expected to increase by 50 per cent YoY to Rs 1,104.9 crore.

KR Choksey: Dr. Reddy's YoY net profit growth of 28 per cent will likely be the highest among its coverage. Revenue is expected to grow 9.6 per cent on year driven by improvement in India, the US, and emerging markets revenue on the back of high-value products such as gVascepa and gVasostrict, and a rise in specialty revenue.

Prabhudas Lilladher: It expects the company to report yearly Ebitda growth of 21 per cent aided by a ramp-up in the US market and Covid-related opportunities. US sales are estimated to rise 10 per cent. On a quarterly basis, it foresees the firm's PAT to grow by a huge 656 per cent. The domestic formulation segment will be aided by product licensing and Novartis’ cardiovascular brand (Cidmus) acquisition, it said.  

Centrum Broking: Dr. Reddy's is expected to report better domestic growth on a sequential basis, while the US business may be impacted by pricing pressure, it says. The brokerage expects YoY revenue and net profit growth of 4 per cent and 12 per cent, respectively, which is the lowest of the estimates.