Dr Reddy's Q4 Preview: Here's what key brokerages expect from its results

Indian pharmaceutical giant Dr Reddy’s Laboratories is set to witness a single to double digit growth in sales on a year-on-year (Y-o-Y) basis for the fourth quarter of financial year 2023-24 (Q4FY23), showing a 6-16 per cent Y-o-Y jump in its topline in the range of Rs 6,668 crore to Rs 7,055 crore, according to brokerage estimates. The company recorded a revenue of Rs 6,296 in the Q4FY23. The pharmaceutical company is expected to release its Q4 earnings on Tuesday, May 7. 

On a quarter on quarter (Q-o-Q) basis, however, the company may see a sequential decline of 3-8 per cent in revenue in the January-March quarter of FY24 due to seasonal weakness, according to analysts. The company posted net sales of Rs 7,214 crore in Q3FY24. 

The pharma major may see a similar trend in net profits, as the profit after tax (PAT) is set to jump by 12-24 per cent Y-o-Y between Rs 1,071 crore to Rs 1,182 crore, while the PAT could lag by 14-22 per cent quarter on quarter (Q-o-Q) compared to the third quarter of FY24. The company had posted a net profit of Rs 1,378 crore in Q3FY24 and Rs 959 crore in Q4FY23. 

Key monitorables: The street will watch out for an update on potential approval and launches in the US over the next 12-18 months to drive growth with an update on status of biosimilars pipeline. 

Here’s what key brokerages expect:

Nomura: The brokerage firm factors in a $40 million decline in US sales Q-o-Q due to a lower contribution from Revlimid. It further notes that in 4QFY23, North America generics declined by $63 million Q-o-Q  owing to lower contributions from Revlimid.

India sales growth was impacted by income from brand divestment booked in 4QFY23. Excluding the brand divestment income, domestic growth was at 8 per cent Y-o-Y.

Analysts at Nomura assume high single-digit to low double-digit growth Y-o-Y in constant currency terms in other international markets in 4QFY24F. Lower US sales and a rise in overheads present downside risk to current consensus estimates for 4QFY24E, analysts said. 

ShareKhan: According to those at ShareKhan, Dr Reddy’s will register a double digit topline growth in the domestic sales followed by a high single digit growth in the US sales depsite of pricing pressures. 

The brokerage estimates, margins to decline sequentially due to lower Revlimid sales in the US market and PAT growth to be reflective of better operating performance. 

PhillipCapital: Analysts at PhillipCapital predict a 9 per cent growth in revenue led by 18 per cent growth in US sales led by Revlimid (at US$90 million versus $75million last year) and a double digit growth across Europe, Russia and RoW markets. 

Analysts believe that the margins, however, will correct 295 basis points Q-o-Q mainly due to lower Revlimid sales, leading to 14 per cent fall in Ebitda. Despite the lower benefit of Revlimid, the resultant PAT is expected to rise by 15 per cent Y-o-Y, analysts wrote in a report. 

Centrum: The brokerage estimates that the pharma major’s US sales will grow by 32 per cent Y-o-Y to $412 million due to robust traction in niche products (Revlimid). 

While domestic formulation sales will grow by 8.6 per cent Y-o-Y led by strong traction in GI/Anti-diabetes/Pain and offset by double-digit decline in cardiac therapy. 

Nirmal Bang: It expects revenue is expected to grow by 12 per cent Y-o-Y. US revenue is expected to grow by 23 per cent Y-o-Y to $378 million on account of a lower base last year. India business is expected to grow by 8 per cent YoY. 

EBITDA margin is expected to improve by 172 basis points Y-o-Y to 26 per cent on account of reduced pricing pressure in the US business, analysts said.