DM Stocks

2021-07-28 04:51:37 1QFY22 Result Review (Antique)

Dr. Reddy’s Laboratories - FY22 starts on flat note, growth likely to be driven by key US Launches

Sales grew by 4% vs 4Q FY21 and grew by 11% vs 1Q FY21. The growth was mainly led by higher sales in India portfolio with higher COVID sales, followed by growth in RoW markets and Europe. DRRD also launched Sputnik V in India in May '21 and 1QFY22 was the first quarter of sales. Sputnik supplies will be ramped up from Aug/Sept'21 as DRRD is working with 6 CMOs for increasing local production. The EBITDA Margin declined 297 BPS vs 4QFY21 and 686 BPS vs 1Q FY21. EBITDA margins were impacted owing to lower gross margins due to price erosion, product mix and higher inventory related provisions along with higher export incentives in 1QFY21. Going forward we expect DRRD to improve its EBITDA Margin with key launches like gRevlimid, gNuvaRing, gKuvan 500mg and gCopaxone lined up for FY22 and FY23. We also expect Adj. PAT to grow 22% in FY22 & 33% in FY23. We resume coverage on the stock with a Hold rating with a target price of INR 5,356, we value the company at 23X P/E on FY23 EPS and assign NPV of INR 55 from the sale of Sputnik vaccines.

Valuations

We believe DRRD has strong pipeline of products for US market and we expect the US growth in FY23 to be around 22% and 14% in FY24. Management has reiterated on their EBITDA Margin guidance of 25% for FY22, with most of the cost control measures already in place we don't expect further improvement in cost structure. There could be some amount of cost savings from operational efficiencies in the form of digitization and automation initiatives and investments in digital initiatives. We resume coverage on the stock with Hold rating and target price of INR 5,356. We value the company at 23X P/E on FY23 EPS and assign NPV of INR 55 from the sale of Sputnik V vaccines. Open / Comment

2021-07-27 17:44:20 *Removal of GSP status of Pakistan by EU can be beneficiary for Indian Textile*
What is the issue: Earlier in April, the EU had adopted a joint motion for a resolution on the blasphemy laws in Pakistan as it urged the Islamic Republic to opt for a more comprehensive approach to address the abuses of blasphemy laws. As a further development to the same, European Parliament on Monday declared that it was withdrawing Pakistan’s GSP status over the controversial Blasphemy laws
Blasphemy laws: A blasphemy law is a law prohibiting the act of insulting or showing contempt or lack of reverence to a deity, or sacred things, or toward something considered sacred or inviolable.
What is Generalised Scheme of Preferences (GSP) status ? - EU’s GSP removes import duties from products coming into the EU market from vulnerable developing countries. This helps developing countries to alleviate poverty and create jobs based on international values and principles, including labour and human rights.
Pakistan - EU trade relation in numbers - Pakistan is one of the few countries that enjoys GSP status in EU. According to media reports, from CY10 to CY20, EU27 imports from Pakistan have almost doubled, with much of the growth coming in the aftermath of the award of GSP in 2014. EU accounted for 28% of Pakistan’s total exports in CY20. Of the many exports, Home Textile is a key segment where Pakistan has a leadership position in EU accounting for 45%+ of EU's HT imports in value terms as pakistan enjoys 0% duty on HT exports to EU.
What changes for Indian Textile Industry (esp. Home Textile) - India is one of the strongest players in Home Textiles. In US India commands a lion's share with 50%+ share in value terms, where it is a level playing field. However, on account of favorable duty structures in EU (due to GSP for many nations incl. Pakistan) India's share in EU imports have remained subdued (below 15% in last 10 years) as Indian HT products attract ~9.5% duty in EU. In case, GSP status is removed for Pakistan in EU, India stands to gain disproportionately. Open / Comment

2021-07-27 13:00:05 Days high close Open / Comment

2021-07-27 12:59:17 Risk reward now favourable for risk takers in Dr Reddys Open / Comment

2021-07-27 12:34:48 KPR Mills good nos + Stock split announced Open / Comment

2021-07-27 12:00:37 Inox Wind chart + watch for holding co IWEL (Inox Wind Energy) Open / Comment

2021-07-27 11:33:44 Sanofi good nos Open / Comment

2021-07-27 10:29:10 Apar good nos Open / Comment