More Stories

Informist, Tuesday, Nov. 5, 2024

 

Please click here to read all liners published on this story

--Dr Reddy's Jul-Sept R&D spend INR 7.3 bln; 9.1% of revenue vs 7.9% 
--Dr Reddy's Jul-Sept bulk drugs, pharma svcs sales INR 8.41 bln, up 20% 
--Dr Reddy's Jul-Sept emerging markts revenue INR 14.55 bln, up 20% on year 
--Dr Reddy's Jul-Sept Europe generics sales INR 5.77 bln, up 9% on year 
--Dr Reddy's Jul-Sept North America generics revenue INR 37.28 bln, up 17% 
--Dr Reddy's Jul-Sept global generics sales INR 71.58 bln vs INR 61.08 bln 
--Dr Reddy's Jul-Sept EBITDA margin 28.4% vs 31.7% yr ago 
--Dr Reddy's: Board OKs investing up to INR 6 bln in Russia-based arm 
--Dr Reddy's Jul-Sept EBITDA INR 22.8 bln, up 5% on year 
--Dr Reddy's Apr-Sept consol revenue INR 157.34 bln vs INR 136.61 bln 
--Dr Reddy's Apr-Sept consol net profit INR 26.48 bln vs INR 28.87 bln 
--Dr Reddy's Jul-Sept consol revenue INR 80.38 bln vs INR 69.03 bln year ago
--Analysts saw Dr Reddy's Jul-Sept consol net profit INR 14.44 bln   
--Dr Reddy's Jul-Sept consol net profit INR 12.56 bln vs INR 14.82 bln 

 

By Apoorva Choubey and Narayana Krishna 

 

MUMBAI/HYDERABAD – Dr. Reddy's Laboratories Ltd. reported the sharpest year-on-year decline in net profits in 10 quarters during the September quarter, even as the topline growth was the highest in five quarters. One-off acquisition costs, one-time product impairment charges and higher raw material expenses limited the benefit of stronger-than-anticipated growth in revenues and improvement in the portfolio mix seen during the reporting quarter. 

 

The drugmaker's consolidated net profit for Jul-Sept fell over 15% on year to INR 12.56 billion, missing the consensus average estimate of INR 14.4 billion. The last time the company's profit after tax crashed in double digits was in Jan-Mar 2022, when the bottom line tanked over 80% due to supply issues and price erosion. 

 

Dr. Reddy's incurred a cost of INR 907 million during the September quarter due to impairment of non-current assets, including the generic equivalent to contraceptive product Nuvaring, according to notes to financial accounts. The impairment was because of procurement problems related to the underlying product from its contract manufacturer, Dr. Reddy's said.

 

During Jul-Sept, the company also incurred one-time expenses related to the acquisition of Haleon Plc's global portfolio of consumer healthcare brands in the Nicotine Replacement Therapy category, in markets outside of the US. This led to a jump in selling, general and administrative expenses compared to a year ago, the company said. 

 

The drugmaker's consolidated revenue from operations jumped 16.5% from a year ago to INR 80.38 billion for Jul-Sept. Analysts had expected the Hyderabad-based company's sales to be INR 77.8 billion for the September quarter. 

 

The revenue from operations, excluding other operating income, also surged 16.5% to INR 80.16 billion during Jul-Sept, marking highest year-on-year sales growth since Apr-Jun of 2023. This revenue included sales, and licence fees and service income. 

 

"We delivered another good quarter and maintained the growth momentum across businesses," G.V. Prasad, co-chairman and managing director, said in a press release. "We made progress on our future growth drivers, operationalised our venture with Nestle and completed the acquisition of Nicotinell and related brands," he added. The company will continue to drive efficiency and strengthen core businesses, he said. 

 

OPERATING METRICS 

During Jul-Sept, the company's operating profit, or earnings before interest, taxes, depreciation and amortisation, rose 5% on year to INR 22.8 billion. Blended gross margins rose 92 basis points from a year ago to 59.6% on account of improvement in product mix and overhead leverage, which was partly offset by product price erosion. 

 

However, the EBITDA margin for the quarter fell to 28.4% from 31.7% a year ago, primarily due to administrative costs shooting up. Dr. Reddy's selling, general and administrative expenses jumped 22% on year to INR 23 billion for Jul-Sept due to one-time expenses related to the acquisition of Nicotine Replacement Therapy assets. Such expenses were equivalent to 28.7% of sales, compared to 27.3% a year ago. 

 

Raw material expenses surged nearly 35% from a year ago to INR 12.9 billion weighing on the profitability. This is the sharpest quarterly jump in raw material expenses in four quarters. The company's employee benefit costs rose 9% to INR 14 billion for Jul-Sept, while total expenses jumped 21% to INR 64.3 billion. Tax outgo surged 32.5% to INR 5.8 billion.  

 

Dr. Reddy's spent INR 7.3 billion on research and development during the September quarter. The R&D spend was equivalent to 9.1% of revenues, higher than 7.9% a year ago. The company has decided to infuse up to INR 6 billion in its Russia-based subsidiary Dr. Reddy’s Laboratories Llc., through equity, for working capital requirements.   

 

On a quarter-on-quarter basis, Dr. Reddy's consolidated revenue rose 4.5%, while net profit fell 10%. For Apr-Sept, the drugmaker's consolidated revenue grew over 15% to INR 157.34 billion, while profit after tax fell 8% to INR 26.48 billion.

 

VERTICALS

The company's largest segment of global generics saw sales surge 17% on year to INR 71.58 billion during Jul-Sept. The growth was broad-based, driven by improved sales volumes and new product launches, the company said.

 

Dr Reddy's generics sales from North America also jumped 17% on year to INR 37.28 billion for the reporting quarter, largely on account of an increase in sales volumes, which was partly offset by price erosion. Analysts had expected relatively weak sales in North America, particularly in the US, due to lack of meaningful launches, despite good contribution from the generic of cancer drug Revlimid. North America accounts for around 47% of the company's total sales.

 

India, which adds 17% to the topline, saw 18% jump in sales to INR 14.0 billion. The performance during Jul-Sept was piloted by sales from the vaccine portfolio in-licensed from Sanofi, new products and price increases. 

 

In Europe, which accounts for 7% of the total sales, the revenue grew 9% on year to INR 5.77 billion for Jul-Sept, led by new products and partly offset by price erosion. For emerging markets, Dr. Reddy's reported sales growth of 20% to INR 14.6 billion. Sales from pharmaceutical services and active ingredients also jumped 20% on year to INR 8.41 billion during the quarter. 

 

The company reported the earnings after market hours. On Tuesday, shares of Dr. Reddy's ended largely unchanged at INR 1,272.20 on the National Stock Exchange.  End

 

Edited by Vandana Hingorani

 

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.