Nestle India, Dr Reddy's Lab hit 52-week lows

Nestle India and Dr Reddy's Laboratories down more than 1% each on the BSE.

Shares of Nestle India and Dr Reddy’s Laboratories, down more than 1% each, have touched their respective 52-week lows on the BSE.

Nestle India was down 1.4% to Rs 5,440 in intra-day trade. In past one-month, the stock of fast moving consumer goods (FMCG) company has dipped 8% from Rs 5,894 as compared to 1% decline in the S&P BSE Sensex.

According to Centrum Broking Nestle would continue to post a revenue decline as Maggie sales started only from November’15. Operating profit is set to decline by 25% to Rs 408 crore as operating margins compress by 232 basis points (bps) due to high fixed cost and ban of Maggi.

“We have revised our estimates downward factoring in lower volume growth due to withdrawal of Maggi from the market and price cuts in milk & other dairy products,” the broking firm said in a results preview.

Nestle will announce the audited financial results of the company for the year ending December 31, 2015 on February 12, 2016.

Dr Reddy’s Laboratories has dipped 2% to Rs 2,893, extending its previous day’s 2% decline on the BSE. Since November 5, 2015, the stock of pharmaceutical company tanked 32% from Rs 4,253 after the company announced that it had received a warning letter issued by the US FDA relating to its API manufacturing facilities situated at Srikakulam (Andhra Pradesh) and Miryalaguda (Tamil Nadu), and also at its Oncology formulation manufacturing facility located in Duvvada (Andhra Pradesh). The benchmark index dipped 6% during the same period.

Analyst at Kotak Institutional Equities expects Dr Reddy’s earnings before interest, taxes, depreciation and amortization (EBITDA) margin to decline by 300 bps quarter-on-quarter (qoq) for the quarter ended December 2015 due to potential Venezuela headwinds and pressures in the US business.

“Higher competition in Decitabine and price erosion in Divalproex sodium should push down US revenues by US$ 8 million qoq. Domestic business is expected to grow at 18%, aided by spillover sales from Q2FY16 (hit by transportation strike), while we expect a 30% YoY decline in Russia + CIS sales due to currency issues. Margins should trend lower due to higher compliance costs and lower Russia sales,” says Religare Institutional Research in Q3 preview.