TCS, Infosys, and Dr Reddy's shares hit fresh record highs

Dr Reddy's rallied 5 per cent to Rs 4,524 today, surging 12 per cent in the past two trading days after the company reported a strong operational performance in Q1FY21.

Shares of Dr Reddy’s Laboratories, Tata Consultancy Services (TCS) and Infosys from the S&P BSE Sensex and Nifty50 index hit their respective fresh all-time highs on the bourses on Thursday.

Dr Reddy’s rallied 5 per cent to Rs 4,524 today, surging 12 per cent in the past two trading days after it reported a strong operational performance with EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins expansion of 611 basis points (bps) year-on-year (YoY) to 25.3 per cent in June quarter (Q1FY21). The stock of the pharmaceutical company surpassed its previous high of Rs 4,383 touched on October 20, 2015.

Q1FY21 revenues grew 14.7 per cent YoY to Rs 4,426 crore mainly due to strong growth in Europe (up 47.7 per cent YoY at Rs 355 crore) and RoW markets (up 56.6 per cent YoY at Rs 328 crore) partially offset by 10.1 per cent YoY decline in the domestic business to Rs 626 crore. US revenues grew 5.9 per cent YoY to Rs 1,728 crore on the back of rupee depreciation.

“The management has reiterated its commitment of working on cost rationalisation, especially on the SGN&A front and calibrating of R&D spend more towards Global Generics front & Biosimilars and lower towards proprietary products. Key growth drivers in the near term would be key launches across geographies besides continuing growth momentum in Global Generics and PSAI (pharmaceutical services and active Ingredients) segment,” ICICI Securities said in result update.

TCS hit a fresh record high of Rs 2,357, up 3 per cent in the intra-day trade on the BSE. With today’s gain, the stock of the IT giant has rallied 13 per cent thus far in July, as compared to a 9.8 per cent rise in the S&P BSE Sensex.

The company’s management believes the worst impact of Covid-19 is behind (both in terms of revenue and profitability) even as some variables such as pricing and working capital cycles warrant a close watch. Brokerage firm Motilal Oswal Securities expects TCS to be a key beneficiary of the Covid-19-led increase in tech intensity across verticals.

Infosys, too, hit a fresh all-time high of Rs 973 in the intra-day trade today, surging 32 per cent since July 1. IT major had posted better-than-expected numbers for Q1FY21, owing to steady performance in most business verticals and geographies, and healthy order flow.

Nomura, the foreign brokerage firm, upgraded Infosys to Buy led by improved positioning in Digital driven by investments over the past couple of years through organic investments, acquisitions and partnerships, improved ability to participate in large deals, the silver linings from Covid-19 in areas of digital transformation, vendor consolidation and captive monetisation where Infosys stands to benefit given its capabilities, breadth of offerings and strong balance sheet position, and better EBIT (earnings before interest tax) margin defensibility compared to peers. The stock is trading close to the brokerage's 12-month target price of Rs 975 per share.