Dr Reddy's slips 8% post June quarter results, hits over 3-month low

Shares of Dr Reddy’s Laboratories (DRL) hit over three-month low as they fell 8 per cent to Rs 4,982 on the BSE in intra-day trade on Tuesday after the company reported a 1 per cent year-on-year (YoY) decline in its consolidated net profit at Rs 570.8 crore in the June quarter (Q1FY22). The drugmaker had posted a profit of Rs 579.3 crore in the year-ago quarter. The stock was trading at its lowest level since April 19, 2021.

Ebitda (earnings before interest, taxes, depreciation, and amortization) margins were down 560 basis points (bps) YoY and 310 bps sequentially at 20.7 per cent during the quarter. Gross profit margin decreased by 380 bps over the previous year and 150 bps sequentially, majorly on account of price erosion and increase in inventory provisions related to few products.

The company’s revenue grew 11 per cent YoY at Rs 4,919 crore as against Rs 4,418 crore in the corresponding quarter of the previous fiscal. India revenue grew 69 per cent YoY, higher than Street's estimates, aided by better traction in the chronic segment and the addition of the Wockhardt portfolio.

However, North American sales were up in single-digit or 1 per cent at Rs 1,739 crore. Analysts had expected double-digit growth from the US sales. The sequential decline of 1 per cent was on account of price erosion in some of the products partially offset by volume traction and new products launched, the company said.

The company’s revenue during the quarter was in line with the estimate, however, net profit and Ebitda margin missed the Street estimates.

ICICI Securities had expected 10.9 per cent YoY growth in revenues. Ebitda margins, it had said, are likely to decline 343 bps YoY to 21.9 per cent due to higher other expenditure. Profit after tax as per its estimates was expected to grow 5.4 per cent YoY to Rs 627 crore mainly due to lower tax rate (26 per cent against 34.3 per cent in Q1FY21).

Motilal Oswal Financial Services had pegged Ebitda margin at 21.9 per cent and net profit of Rs 610.4 crore for the quarter.