Dr. Reddys Laboratories: Q3FY23 Result Update
30-01-2023

Market Cap Rs. 71,995cr

CMP Rs. 4,321 | PE 19.8x TTM

Results	INR Cr.	Y-o-Y Growth	Comments
Revenue	6,770	27.3%	Revenue growth of 27.3% YoY led by strong growth in USA (64% YoY), Emerging Markets (14% YoY) and India (10% YoY)
Gross Profit	4,009	40.1%	Gross margins came in at 59.2% (vs 53.8% in Q3FY22) primarily driven by new product launches with higher margin profiles, favourable product and favourable forex movements
EBITDA	2,082	69.9%	EBITDA margins came in at 30.8% (vs 23% in Q3FY22) due higher gross margins and relative reduction in SG&A expenses

Key Highlights:

US sales growth driven by launch of gRevlimid (revenue of ~$140mn in Q3), 5 new launches and favourable forex movements, which was partly offset by price erosion in some molecules.
Emerging markets growth was primarily due to the strong growth experienced in Russia (45% YoY). It launched 29 products in Q3.
India sales growth was led by price hikes and 2 new product launches, although there was volume contraction in certain molecules.

Management Outlook:

Management expects contribution from gRevlimid to fluctuate quarterly but to remain meaningful on annual basis. It also expects ex-gRevlimid business in the US to grow in single digits.
Management expects Indian business to sustain double-digit growth through a combination of organic route, product innovation, investments in marketing and divestment of legacy brands.
The company is looking to file double-digit number of products in China (40-50 over the next 3 years). Meaningful ramp up in growth of China operations are expected by H2FY24 by the management.
Management has guided EBITDA margins and RoCE to be ~25%.