Why Dr. Reddy's Labs Share Price Is Dropping After Q4 Results

Shares of Dr. Reddy's Laboratories were falling on Wednesday after the firm’s fourth-quarter results showed signs of sluggish growth in some areas.

What Happened: The drugmaker said its profit grew 36% to ₹1,307 crore for the quarter ended March 31, up from the ₹959.2 crore it earned in the same quarter last year. This was slightly higher than analyst estimates of ₹1,291 crore.

The company's revenue came in at ₹7,083 crore, up 12% from ₹6,296.8 crore a year ago. The figure was slightly lower than analyst estimates of ₹7,136 crore.

“Our growth and profitability in FY2024 has been driven by our performance in the US. We have also made significant progress on future growth drivers through licensing collaboration and pipeline building,” said co-chairman and managing director G V Prasad. 

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The company's also board also recommended a dividend of ₹40 per equity share for the year.

The firm's EBITDA for the quarter grew 14.8% to ₹1,872 crore, higher than the ₹1631.1 crore it made last year.

Revenue from the North America segment grew 29% to ₹3,260 crore but also registered a quarter-on-quarter decline of 3%, owing to a decrease in base business volumes and price erosion in select brands, the company said.

Analyst Thoughts: Nomura has maintained a “neutral” rating on Dr Reddy’s Laboratories with a target of ₹6,499 per share. It said Dr Reddy’s sales, EBITDA and profit were 6%,9% and 22% higher than estimates.

The brokerage said it thinks contribution from cancer drug gRevlimid held up during the quarter supporting strong gross margin and leading to an EBITDA beat. This came despite research and development costs rising 24% quarter on quarter and being 25% higher than estimates.

Kotak Securities maintained its “reduce” rating for the stock but raised the target price to ₹5,935 from ₹5,825. The brokerage said that the company’s performance in the quarter was subdued and much lower than its estimates. The analysts also pointed out that the absence of any meaningful approvals for the company stays a concern.

HDFC Securities also maintained its “reduce” rating for the stock with a target price of ₹6,050.

Price Action: Dr. Reddy's Labs’ share price was down 3.4% at ₹6,044.65 in early trade on Wednesday.

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