Pharma stock down 25% from highs. Brokerages have ‘Buy’ tag


During its investor day, Dr Reddy’s re-iterated its 25%/25% EBITDA/ROCE targets & elaborated on the levers that will help achieve these. Dr Reddy’s aims for sustainable double-digit top-line growth, & plans to expand existing business and seek new opportunities such as Biologics CDMO & CGT, highlighted Jefferies in a note. 

The global brokerage has Buy tag on Dr Reddys shares with a target price of 5,036 apiece. The pharma stock is down 13% in 2022 (YTD) so far, and is trading about 25% below its 52-week high. 

Dr Reddy’s also highlighted its US pipeline, & said it will work towards building a more backward-integrated company. The drug major plans to scale up its existing business, which it says will help to deliver growth in the short to medium terms.

“Dr Reddy’s has identified 3 pillars to achieves its target: Leadership in chosen spaces — economy of scale, complex, brands and clinically differentiated products, Productivity — Digitization & automation, operational & commercial excellence, continuous improvement, & Innovation,” Jefferies added.

Domestic brokerage and research firm Motilal Oswal is also bullish on the pharma stock on the back on niche launches in US generics, leveraging its portfolio at global level, increasing backward integration as well as controlled cost. It has maintained Buy rating on DRL with target price of 4,950.

In addition to enhancing existing brands franchise, Dr Reddy’s continues to offer differentiated portfolio through organic as well as inorganic means to accelerate growth prospects in domestic formulation. 

Dr Reddy’s plans to build scale in EU5 – Germany, UK, Spain, France, and Italy, selective geographical expansion; & launch more FTFs. Over the long term the pharma company expects to venture into Biosimilars and new spaces such as pharmaceutical Cannabis.

 “Based on its limited-competition product pipeline in the US market, strong core therapies in DF, and the stock’s attractive valuation, we maintain our Buy rating,” the brokerage’s note stated.

Dr Reddy’s Laboratories Ltd.’s consolidated profit after tax for the fourth quarter ended March 2022 fell 76% to 87 crore, compared with 362 crore a year ago, mainly on account of impairment costs.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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