Dr. Reddy posts a 77% jump in net profits after Q3. Should you invest in the company’s stocks?

Investment tips for Dr. Reddy’s shares after 77% profit growth

Dr Reddy Shares

The leading pharmaceutical giant, Dr. Reddy Laboratories Limited, proved the market and analysts wrong when it declared its quarterly results for the quarter ending 31st December 2022. The company delivered a performance that surpassed market expectations. Its net profit alone jumped 77% on a yearly basis as it stood at Rs.1247 crores compared to Rs.706.5 crores a year earlier. Other snippets of the quarterly report are as follows –

Dr. Reddy's Q3 performance 

  • Revenue increased 27% on a yearly basis to stand at Rs.6770 crores. Last year, the revenue was reported at Rs.5319.7 crores.
  • The growth in the topline was majorly attributed to the high demand for Revlimid, a multiple myeloma medicine that the company launched in the US last year.
  • The gross margin increased to 59.2% compared to 53.8% a year ago.
  • The EBITDA was reported at Rs.19.7 million, and the EBITDA margin was 29%.

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What should you do with Dr. Reddy's shares?

After the company's financial performance, experts have come up with recommendations regarding the company’s shares. Here’s what some leading broking houses have to say –

  • One company believes investors should hold the stock and have assigned a target price of Rs.4675. The firm sees long-term potential in the company due to upcoming orders and the opportunity from China. However, if Revlimid is taken out of the equation, the company might face challenges due to competition. The firm kept the core EPS expectation constant and expected the EPS in the next financial year to rise by 12% or 13% on Revlimid demand.
  • Another broking house recommended buying the stock with a target price of Rs.4880. The company delivered better profit figures due to Revlimid sales than the firm's estimates. The adjusted gross margin and EBITDA margin have performed as expected. Given the upcoming launches, increased sales of Revlimid in the US, and sustained growth in India, the company is poised for growth.
  • Another broking house backed the ‘Buy’ claim with a target price of Rs.4825. The firm pointed out the upcoming launch of 30 new products in the US, which would further Dr. Reddy’s growth story. Another factor is the stable balance sheet and cashflows that will also help the company maintain its financial performance in the upcoming quarter.

Based on these expert assessments, the shares of Dr. Reddy are a good investment opportunity for investors. So, if you want pharma exposure and have the needed risk tolerance, you can invest in the company’s stock and benefit from its growth.

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