Dr Reddys Labs an outperformer, target of Rs 925: Karvy

Karvy Stock Broking has recommended an outperformer rating on Dr Reddy’s Labs with a price target of Rs 925 in its report dated June 11, 2009.

“Dr Reddys Lab has received the USFDA approval for Omeprazole OTC. Shipment of this product will commence in Q2 FY2010. This is a USD 500 million low competition market with two players, Astra Zeneca and Perrigo in this market. We believe this could be a USD 53 million revenue opportunity for the company in the current year and would remain for some time. Another opportunity in the foreseeable future is Arixtra which is a USD 163 million niche opportunity with a likely revenue upside of USD 48 million in FY 11.”

“The approval for Arixtra is expected in 4Q FY10/Q1 FY11. On account of the Prilosec OTC approval and current re- rating, we upgrade our multiple from 14x to16x and upgrade our price by 15% to Rs 925 based on 16x FY11E. The company has set a target of USD 3 billion revenue turnover and a ROCE of 25 % by FY 13. The revenue growth would be organic growth in global generics segment driven primarily by US and aided also by Europe, Russia and India. We maintain our ‘outperformer’ rating on the stock,” says Karvy’s report.

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