Dr Reddys falls 10% in 2 days, hits over 4-month low post Q3 results

Shares of Dr Reddy’s Laboratories dipped 4 per cent to Rs 4,400 on the BSE in an otherwise strong market on Monday, thus falling 10 per cent in the past two trading days after reporting a consolidated net profit of Rs 20 crore in the December 2020 quarter (Q3FY21) against a loss of Rs 569.7 crore in the year-ago period. The drug maker's stock was trading lower for the fourth straight day, falling 13 per cent during that period. It hit an over four-month low and trading at its lowest level since September 15, 2019.

The company said the profits were impacted due to trigger based impairment charge taken on a few acquired products, including gNuvaring. Not accounting for impairment cost, the company's net profit in the quarter would have been at Rs 882 crore, it said.

The firm posted a 12 per cent year-on-year growth in revenues to Rs 4,930 crore and a 10 per cent year on year growth in Ebitda (earnings before interest, taxes, depreciation, and amortisation) to Rs 1,185 crore while the Ebitda margin stood at 24 per cent against 24.5 per cent in a year ago quarter.

The gross profit margin decline 30 basis points (bps) at 53.8 per cent over previous year and 10 bps sequentially, which was primarily impacted due to price erosion and lower export benefits, partially offset by the milestone income received for the compound AUR102.

Dr Reddy’s Q3FY21 performance was below expectations, weighed by moderation in the North America (NA) / Pharmaceutical Services and Active Ingredients (PSAI) segments and increased opex toward sales/promotion activities for the Branded Generics segment. The company has completed the integration of the Wockhardt portfolio and is in the process of harnessing synergy benefits in the Domestic Formulation (DF) segment, Motilal Oswal Securities said.

“Adjusting for one-time impairment charges taken in Q3, results were in line with our estimates on all fronts. We draw comfort from the management’s sustained focus on cost rationalisation, especially on selling expenses and all general and administrative expenses (SGN&A) front and endeavour to focus on simultaneous launches across geographies and segments besides realignment of R&D spend towards - Global Generics, Biosimilars and PSAI segment. We believe the efforts taken in the last few quarters are sustainable and should support stable performances, going ahead,” ICICI Securities said in a result update.

At 01:08 pm, Dr Reddy’s was trading 3.6 per cent lower at Rs 4,428 on the BSE, as compared to 3.4 per cent rise in the S&P BSE Sensex. A combined 1.6 million equity shares had changed hands on the counter on the NSE and BSE, till the filing of this report.