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Dolat Capital Report
Dr. Reddy’s Laboratories Ltd. reported a strong Q1 beating estimates across the board led by superlative performance in the active pharmaceutical ingredients segment (up 88% YoY) as clients opt to de-risk supplies.
This coupled with favourable pricing, better product mix (we believe higher realisation in APIs and improved productivity) led to gross margins of 56%, in turn leading to healthy Ebitda margins of 26.3%.
While management hinted of some fluctuation in gross and Ebitda margins going ahead, it remained confident about the sustenance of its API segment performance and Ebitda margins, which we believe is a little stretched.
We are concerned about the extrapolation of this quarter’s trend as expenses rise in H2 FY21. Besides, with seasonality sales (H1 is the strongest) lost in India due to partial lockdown and rise in spends, performance of H2 versus H1 would be more crucial.
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