ICICI Securities Lists Five Triggers To Drive Growth For Dr. Reddy’s Labs
ICICI Securities upgraded Dr. Reddy’s Laboratories’ stock rating to ‘Add’ from ‘Hold’.
Dr. Reddy’s Laboratories Ltd.’s revenue and margins are expected to improve going forward, led by growth in its U.S. and domestic businesses, according to ICICI Securities.
The broking firm upgraded the stock’s rating to ‘Add’ from ‘Hold’, considering expectation of growth revival and attractive valuations.
Indian generic drugmakers’ margins are under pressure because of competition in the U.S., one of their largest markets. ICICI Securities lists out five factors that would help the pharmaceutical company to offset base business price erosion and also drive growth in U.S. sales:
- Clearance of its Srikakulam API facility in the near term.
- Clearance of Duvvada oncology plant by March 2019.
- The launch of generic Nuvaring in the second quarter of the next financial year.
- The launch of generic Suboxone in the second half of next financial year.
- The launch of generic Copaxone in the first half of the financial year-ending March 2020.
The research firm, however, reduced its earnings estimates by 1-6 percent for financial years 2018-2020 to factor in the delay in launch timeline of generic Copaxone from an earlier expectation of next financial year and continued pricing pressure during the period.
It also cut the drug maker’s price target to Rs 2,378 from earlier Rs 2,487, implying a potential upside of 10 percent from the stock’s last regular trade.
Dr Reddy’s Labs trades at 29.7 times trailing 12-month earnings per share and 32 times its estimates for the coming year, Bloomberg data showed. The stock is 18 percent below the Bloomberg consensus one-year target price. The scrip declined 11 percent so far this year.