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HDFC Securities: Dr. Reddy’s Labs - Improved Visibility In The U.S. Business

HDFC Securities sees gVascepa’s launch in the U.S. as aiding Dr. Reddy’s earnings per share by 7-8% in 2020-21.

Workers pour in raw material to product medicine capsules at Dr Reddy’s plant in Bachupally, Andra Pradesh, in India. (Photographer Amit Bhargava/Bloomberg)
Workers pour in raw material to product medicine capsules at Dr Reddy’s plant in Bachupally, Andra Pradesh, in India. (Photographer Amit Bhargava/Bloomberg)

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HDFC Securities Report

The growth visibility of the Dr. Reddy Laboratories Ltd.’s U.S. business has improved with the strong momentum of new launches (12 launches in year-to-date FY21) including niche ones such as gCiprodex (first to market).

The dependence of gCopaxone and gNuvaring on FY22 earnings reduces with the new product flow and favourable ruling of gVascepa (now in our estimates).

Structural tailwinds in the active pharmaceutical ingredient (API) business (15% of revenues) will lead to double digit growth over the next few years.

We increase our earning per share forecast by 7-8% for FY21/22 to factor gVascepa launch and our target multiple to 22 times (from 20 times earlier) to factor improved visibility in the U.S. and API business.

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HDFC Securities Dr Reddys Labs Update.pdf

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