Buy Dr Reddy’s Labs: Indiabulls Securities
Indiabulls Securities Research has upgraded its rating on Dr Reddy’s Laboratories to buy in its July 07, 2009 report.
“Dr Reddy’s Laboratories (DRL)’s top line increased by an impressive 51.6% yoy, for the second quarter on the trot, in Q4’09, surpassing our expectation mainly due to continuing benefit of Sumatriptan authorised generic (ex-Sumatriptan, revenue grew 21% yoy). Better-than-average generic pricing also resulted in a strong 10.4 pts yoy gain in EBITDA margin. However, a Rs. 14 bn non-cash write-off of goodwill and intangibles related to Betapharm acquisition in Germany restricted the net margin improvement to 6.2 pts.”
“We expect DRL’s core earnings to grow 20% and 16% in FY10 and FY11, respectively on the expectation of the shift in its strategy to focus on the underpenetrated generics market. The early signs of success have already started appearing with the growing momentum in the North American markets. As Our DCF valuation provides a fair price of Rs. 931, we upgrade our recommendation on DRL’s stock to Buy,” says Indiabulls Securities’ research report.
source: Moneycontrol
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