Dr. Reddy’s PAT jumps 70% to Rs 618.42 crore

Dr. Reddy’s Laboratory Ltd, a global Pharmaceutical Company engaged in businesses like Pharmaceutical Services & Active Ingredients, Global Generics & Priority Products on February 12, 2014 announced its unaudited quarterly result for the quarter ended December 31, 2013. 

The company posted a handsome growth in topline of 23% on YoY basis to Rs 3533.76 crore compared to the same quarter of the previous year. The total revenue of the company comprises income from global generics segment, pharmaceutical services & active ingredients. During this quarter, the total revenue of the company increased primarily due to an increase in the income from the Global Generics segment (accounts 80% of total revenue) by 41% on yearly basis to Rs 2939.58 crore driven by North America and other emerging markets. Meanwhile, the Pharmaceuticals Services & Active Ingredients (PSAI) stood at Rs 654.18 crore in the Q3FY14, reporting a decline of around 29 % compared to the same quarter of previous year.

The revenue from North America jumped 76 % to Rs 1620 crore while emerging markets (including Russia, CIS countries and rest of the world territories) sales climbed up by 25 % to Rs 740 crore on YoY basis. The revenue from India was up by more than 5% to Rs 390 crore while revenue from Europe remained flat at Rs 190 crore compared to the same period of the previous year.

The total expenditure of the company in the Q3FY14 stood at Rs 2669.39 crore, reporting a growth of more than 10 % compared to the same period of the previous year. The increase in total expenditure can be attributed to an increase in R&D and selling expenditure. The research and distribution expenditure in this quarter has increased by more than 47 % to Rs 297.91 crore compared to the same quarter of the previous year. The selling and administration expenditure has increased by more than 21 % YoY basis to Rs 1044.27 crore.

On EBITDA front, the company has posted a growth of more than 66 % on YoY basis to Rs 1004.9 crore in the Q3FY14 compared to the same quarter of the previous year. The EBITDA has increased mainly due to an increase in the total revenue and reduction in raw materials costs. The cost of raw materials has reduced by more than 5 % on YoY basis to Rs 890.74 crore compared to the same period of the previous year. The EBITDA margin has increased to 28.43 % for the quarter ended December 31, 2013 compared to 21 % for the quarter ended December 31, 2012. The margin improved mainly on account of higher realisation from new products launched in North America.

The company has reported a growth of more than 70 % in Profit After Tax (PAT) to Rs 618.42 crore in the Q3FY14 compared to Rs 363.31 crore in the Q3FY13. The sharp increase in profit can be attributed to increase in revenue and due to reduction in total expenditure as proportionate to total revenue. The higher tax cost has squeezed the PAT, otherwise it would have been more attractive. Due to Incremental forex, the finance cost which showed negative balance in as Rs 9.6 crore in the Q3FY13, showed a positive balance of Rs 1.6 crore in the Q3FY14. The income tax in this quarter has increased by more than 205 % to Rs 252.1 crore compared to the same quarter of the previous year.

The company has informed that they have launched 7 new generic products, filled 4 new product registrations and filled 19 DMFs globally.

More than 85% of the total revenue of the company comes from export and it derived three fourth of its revenue from formulations.

From the above analysis we can say that the company has been performing well. And we expect the company will continue to increase its profits and margins in the coming quarters.  On BSE yesterday (February 11, 2014), the stock opened at Rs 2693.50 and closed at Rs 2658.95. The stock is trading at a P/E(TTM) of 22.78x. In the last one year the stock has performed well. It has given a positive return of 40.18 %. The pharmaceutical sector has been the most preferable sector for investors to invest. Investors with a one year investment horizon can choose this share for investment.