Dr Reddy’s Q2 Preview: PAT may grow up to 11–18% YoY; revenue seen steady despite pricing pressure in US

Dr Reddy’s Laboratories is expected to report a steady set of numbers for the September quarter, driven by healthy traction in the India, Europe and non-US geographies, even as US revenue faces pricing pressure in key products like Revlimid. Multiple brokerages project double-digit growth in revenue and profit while seeing some strain in the margins due to product mix changes and higher price erosion in generics.

The estimates of Kotak Institutional Equities, ElaraCapital, Nuvama Institutional Equities and Yes Securities have been taken into account.

The drug major part of Nifty companies will announce its earnings on Friday, October 24.

Here’s what brokerages recommended:

1. PAT

Brokerages expect Dr Reddy’s profit after tax (PAT) to rise between 11–18% year-on-year and 2–5.5% sequentially, led by stable operational performance and improved domestic and European sales.

– Kotak Equities expects PAT at Rs 1,485 crore, up 10% YoY and 5.3% QoQ, supported by robust India and Russia growth.– Elara Capital pegs PAT slightly higher at Rs 1,495 crore, up 11.1% YoY and 5.5% QoQ, aided by margin improvement.– Nuvama sees core PAT at Rs 1,457 crore, a 13% YoY increase, benefitting from the Haleon integration.

– Yes Securities estimates PAT at Rs 1,454 crore, up 16% YoY and 2.5% QoQ, backed by stable performance across regions.

2. Revenue

Revenue growth is expected in the 10–14% YoY range, driven by solid performance in India, Europe and non-US markets, even as the US segment moderates post-Revlimid.

Kotak Equities forecasts revenue at Rs 9,110 crore, up 13.3% YoY and 6.3% QoQ, with North America sales at US$395 million (-1% QoQ) due to Revlimid pricing pressure.

Elara Capital projects the topline at Rs 9,115 crore, up 13.7% YoY and 6.7% QoQ, the most optimistic estimate among brokerages.

Yes Securities expects revenue at Rs 8,839 crore, a 10% YoY and 3.1% QoQ rise, supported by strong India and Europe growth.

Nuvama estimates revenue at Rs 8,810 crore, up 10% YoY, noting pressure from price erosion in Lenalidomide and temporary challenges in Russia.

3. EBITDA

– Elara Capital expects EBITDA at Rs 2,409 crore, up 12% YoY and 12% QoQ, the most bullish among peers.

– Kotak Equities forecasts Rs 2,285 crore, up 5.4% YoY and 5.1% QoQ.

– Nuvama estimates Rs 2,237 crore, flat YoY but up 4% QoQ, reflecting weaker product mix.

– Yes Securities is more conservative at Rs 2,208 crore, with a YoY decline of 201 bps in margin terms.

4. EBITDA margin

– Margins are expected to compress slightly on a yearly basis due to higher price erosion in key US molecules and a less favorable product mix.

– Kotak Equities expects margins at 25.1%, down 190 bps YoY and 28 bps QoQ, owing to softer gross margins at 66.7%.

– Nuvama projects 25.4% EBITDA margin, down YoY as Lenalidomide erosion and Russia challenges weigh on profitability.

– Yes Securities also foresees margin pressure, with declines on both YoY and QoQ bases.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)