Dr. Reddy’s Q2FY21 Results update

Dr. Reddy's Laboratories, an Indian multinational pharmaceutical company, declared its Q2 results, driven by 28%  and 36% growth from North American and European revenues respectively. The growth numbers are attributable to the improvement in the base business and product launches such as Ciprodex and Tecfidera.

PAT: Profit after tax stood at ₹ 762 crore, a decline of 30.32% year-on-year from ₹ 1,092.5 crore. The profit after tax, however, increased 32% from last quarter.

Effective Tax Rate: The effective tax rate is ~ 11.6% for the quarter, which is lower primarily due to recognition of deferred tax assets for one of Dr. Reddy’s subsidiaries. The company had a tax credit of Rs 326.1 crore in the year-ago period.

Revenue: Consolidated revenue during the quarter increased 2% to ₹ 4,896.7 crore year-on-year, as there were proprietary products out-licensing income in Q2FY20, and the same grew by 11% quarter-on-quarter. The Q2FY21 year-on-year revenue growth stood at 20% after adjusting for proprietary products out-licensing income in the previous year.

Gross Profit Margin: The margin declined 210bps (2.1%) from last quarter on account of lower export incentives, adverse forex and products mix. The EBITDA increased 8.6% on-year to ₹ 1,156 crore.

Sales Growth and Mix: Company’s proprietary product business saw revenue falling 92% to ₹  62.1 crore during the quarter. However, the global generics business grew 21% to ₹ 3,984.1 crore. 

European sales increased 36% while emerging markets were the worst performers with 4% increases year-on-year. 

The US saw year-on-year sales growth of 28%, driven by contributions from new products launched, increase in volumes of base products and aided by a favorable forex rate.

Indian sales increased 21% year-on-year and 46% quarter-on-quarter, primarily on account of revenues from the acquired business of Wockhardt and contribution from new products including the Avigan (Favipiravir) and Remdesivir launched for treatment of Covid-19.

SG and A, R and D Expenses: Selling, general and administrative expenses reduced 1% year-on-year, however increased 3% quarter-on-quarter primarily due to the integration of the acquired divisions from Wockhardt and pickup in sales & marketing activities post un-lock.

Research and Development , as percentage of revenue were at 8.9% for the quarter ended September 2020 with a focus to continue building a healthy pipeline of new products across markets,including development of products pertaining to COVID-19 treatment

New CFO: The company, in a separate release, announced the appointment of Parag Agarwal, as the Chief Financial Officer. Parag has an experience spanning 33 years across Reckitt Benckiser, GSK, Unilever. 

Dr. Reddy’s closed Wednesday’s trade at ₹ 4,951, down 2.91% from yesterday. New products would help Dr. Reddy’s gain momentum in the US markets. In the Indian markets, despite Covid-19 challenge, the Indian growth is driven by better traction in the chronic portfolio and the benefit from the acquired Wockhardt portfolio.