Dr Reddy's shares surge 8% post q4 earnings; What should investors do?

Shares of Dr Reddy's surged eight per cent amid a spurt in volume to Rs 4247 a share on Friday's intraday trade after the company came out with its earnings for the quarter ended March 31, 2022. At 1 pm, the scrip was trading at Rs 4233.05 apiece on the BSE, a jump of Rs 305 or 7.76%.  

Dr Reddy's profit after tax (PAT) for the quarter ended March 31 was down by 76 per cent to Rs 87.5 crore against Rs 362.4 crore in the same quarter a year ago. Revenue during the quarter under discussion was up by 15 per cent to Rs 5,436.8 crore compared with Rs 4,728.4 crore in the last quarter of FY '21, reported news agency PTI. 

Meanwhile, even as the company witnessed a 76% decline in PAT, brokerages remained bullish on this pharmaceutical stock.  

Brokerage firms ICICI Securities and Motilal Oswal were bullish on back of growth in revenue and Dr Reddy's laboratories expansion plans. They see an upside of about 25% in this pharmaceutical counter from current levels.  

Dr Reddy's Laboratories revenue from the emerging markets, including Russia, during the fourth quarter was at Rs 1201 crore, a jump of 36 per cent over the same quarter a year ago.  

"Revenue from Russia for the year was at Rs 2,090 crore, YoY growth of 32 per cent driven by improved base business performance, launch of new products during the year and divestment of a few non-core brands. Revenue from India stood at nearly Rs 969 crore up 15 per cent over last year same period," said the company in a regulatory filing on Thursday. 

ICICI Securities on Dr Reddy's 

ICICI Securities maintained a buy rating on Dr Reddy's with a revised target price of Rs 4,925, an upside of 25.3% on Thursday's closing price of Rs 3928. The brokerage firm though reduced the target price, which was previously pegged at Rs 5,359 a share, however, it remained bullish on the stock.  

As per the brokerage, despite pricing pressures, US revenue grew 5.1% QoQ to US$263mn on the back of new product launches and scale up of existing products.  

DRL recorded several one-offs during the quarter (sale of two brands in Russia and impairment on few assets), it said.  

Motilal Oswal on Dr Reddy's 

Though Dr Reddy’s Labs (DRRD)’s 4QFY22 result was below expectation of Motilal Oswal, it retained a buy rating over superior execution across key markets supported by the healthy pace of launches and market share gains in existing products. 

At target price of Rs 4800 per share, Motilal Oswal sees an upside of 22% on yesterday's closing basis.  

"The controlled cost is likely to improve operating leverage and drive better profitability over the next 2-3 years. Retain BUY," it said.  

Meanwhile, Dr Reddy's gave a negative return of 18% in the past one year as on May 20, showed technical data of the pharma stock.  

The counter traded on 52-week high value of Rs 5,613.65 on July 7 last year, while it touched year-low of Rs 3,655 on March 4 this year.