Top Indian Companies: Dr. Reddy's Laboratories

Dr. Reddy's Laboratories is an Indian multinational pharmaceutical company located in Hyderabad, Telangana, India. The company was founded by Kallam Anji Reddy, who previously worked in the mentor institute Indian Drugs and Pharmaceuticals Limited.

Dr. Reddy's manufactures and markets a wide range of pharmaceuticals in India and overseas. The company has over 190 medications, 60 active pharmaceutical ingredients (APIs) for drug manufacture, diagnostic kits, critical care, and biotechnology products.

Dr Reddy’s is part of Nifty index with a weightage of 0.69% on the index.

Key business segments

Pharmaceutical Services and Active Ingredients (PSAI), Global Generics (GG), and Proprietary Products. Major therapeutic areas are nervous system, gastrointestinal, cardiovascular, diabetology, oncology, pain management, respiratory and anti-infective.

Shareholding Pattern

The Shareholding Pattern page of Dr. Reddy's Laboratories Ltd. presents the Promoter's holding, FII's holding, DII's Holding, and Share holding by general public etc.

Holder's Name No of Shares % Share Holding

No of Shares 166416892 100%

Promoters 44461128 26.72%

Foreign Institutions 45634712 27.42%

Banks/Mutual Funds 20744584 12.47%

Others 25005928 15.03%

General Public 13756433 8.27%

Financial Institutions 16342536 9.82%

GDR 471571 0.28%

FY2023 Q4 and Full Year Results

Dr Reddy's Lab reported multifold growth (996 per cent) in its consolidated profit after tax to Rs 959.2 crore due to low base during the same quarter previous year.

It was 87.5 crore in the January-March period of FY22.

Parag Agarwal, Chief Financial Officer of Dr Reddy's, said Revenues for the quarter under discussion was up by 25 per cent to Rs 6,297 crore on the back of strong growth from North America, Europe and Indian markets, against Rs 5,437 crore in Q4 of last fiscal.

For the full financial year PAT stood at Rs 4507 crore against Rs 2357 crore, a growth of 91 per cent while revenues during the last fiscal was up by 15 per cent to Rs 24, 588 crore against Rs 21439 crore in FY22.

“This (FY23) has been a record year for us with a double digit growth in revenues as well as profits. Our revenue growth has been supported by new product launches and we have seen strong underlying growth momentum in all our businesses,” Agarwal told reporters in a press conference.

He further said the strong financial performance reflected in strong cash flows. The drug maker currently has over Rs 5000 crore cash surplus in the Balance Sheet.

The Board has recommended payment of a dividend of Rs. 40 per equity share of face value Rs 5 each (800 per cent of face value) for the year ended March 31, 2023 subject to approval of the shareholders of the company.

The revenues from global generics in North America during the fourth quarter stood at Rs 2532 crore a YoY growth of 27 per cent. Dr Reddy's during the quarter, launched six new products taking the total launches of the year to 25 products.

Sales from India witnessed 17 per cent growth at Rs 1,280 crore attributable to increase in prices of the existing products, along with additional revenues from the launch of new products.

Europe revenues in Q4 stood at Rs 500 crore with 15 per cent growth while emerging markets contributed Rs 1,110 crore in the fourth quarter up seven per cent compared to the same period in FY22.

The Pharmaceutical Services and Active Ingredients (PSAI) segment revenues were up three per cent to Rs 778 crore against Rs 756 crore in Q4 of FY22.

The company spent Rs 1940 crore on Research and Development expenses in FY23 and is expected to spend 8-9 per cent on total sales in the current fiscal, Agarwal said.

The official said during the last fiscal Dr Reddy's made a significant progress on Rituximab with filings done in USA, Europe and UK and as far as Tocilizumab is concerned Phase-3 studies began.

Brokerage Outlook

Brokerage, KRChoksey Institutional, introduce FY24 projection and expect the revenue and adj. net income to grow at 11.9% and 19.3% CAGR, respectively over FY21- FY24E. Since our last update on the stock in Nov 21, the stock has declined by 9% and presents an attractive value proposition as the stock trades at 25.2x/20.62x/17.5x on its FY22E/FY23E/FY24E EPS estimates.

KR Choksey apply a 21.4x target P/E multiple on FY24E EPS of INR 245.3, which yields a target price of INR 5,261 (unchanged) on the shares of Dr. Reddy’s, with an upside potential of 22.3% from its CMP of INR 4,303/ share. Accordingly, Brokerage upgrade their “ACCUMULATE” rating on the shares of Dr. Reddy’s to “BUY”.

Esg and Sustainability

At Dr. Reddy’s consistently strive to improve resource conservation and energy efficiency through the implementation of eco-friendly technologies and cutting-edge manufacturing processes.

Dr. Reddy’s are conscious of the environmental footprint and are committed to make our business sustainable.

Key focus areas are - emission management, energy efficiency, water resource management, resource conservation, hazardous waste management and biodiversity conservation.

Dr. Reddy’s installed a coal-based co-generation plant in 2017 helped ensure reliable power supply, it impeded progress pertaining to specific energy consumption and renewable energy.