Shares of Dr Reddy’s Laboratories (DRL) on Friday gained as much as 6.09 percent to Rs 4,167.10 in early trade as investors seemed unperturbed by the shocking drop in the company's profit.

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At 12:30 pm, the stock was up 6.95 percent or Rs 273.05 higher at Rs 4,201.10 apiece on the BSE.

The stock has been gaining for the last four days and has outperformed the sector by 4.56 percent.

The company posted a sharp decline in its profit at Rs 88 crore in the fourth quarter ended March 2022, but that didn't impact investor sentiment at the slightest.

The company's revenue and margin saw a slight increase in the Q4 numbers.

In an interview with CNBC-TV18, Erez Israeli, CEO at Dr Reddy’s Laboratories, reiterated his confidence in the base business.

“The base business is growing both on bottomline as well as topline in double-digits, so we are maintaining our guidance that we will continue to grow and aim for the famous 25-25," he said.

"We are in the neighborhood of 25 percent EBITDA and this will likely continue in the future. Indeed, it will fluctuate from time to time, assets related to certain situations or markets but overall, the base business is healthy and would continue to grow,” he added.

DRL saw significant price erosion in the US, which was offset by new launches this time around. Israeli said that going ahead too, that will be the company's motto - to launch three to five new products each year while eyeing a bigger market share.

Barring Credit Suisse, most brokerages continue to remain bullish on the DRL stock. The financial services firm, however, has a neutral rating on DRL with a target price of Rs 4,465 per share.

Here’s a look at the ratings and target price of other brokerages on DRL:

In an interview with CNBC-TV18, Vishal Manchanda, Pharma Analyst at Nirmal Bang Institutional Equities, said that DRL's impairment costs took the net earnings down, however, he remains confident of the company's US business prospects and expects it to aid the company, going ahead.

“Reddy’s results were much better than expectations, large beat on both EBITDA and revenues. Net earnings came in lower because of some one-time charges related to impairment. If you look at Reddy’s, there are multiple growth opportunities for them. The US probably should be the one that we need to watch out for in FY23," he mentioned.

"They have a large Revlimid launch lined up. In addition, they are also getting some good approvals, they got approval for another drug, which can, maybe add about $30-40 billion to their top line in the US. So US is something that probably would move the needle for Reddy’s meaningfully in FY23,” he said.

Manchanda believes that API business could rebound in FY22.

He said, “The API business which has been weak in FY22 and probably it has been weak for most companies in the sector, that can rebound. API business was weaker, because we know FY21 saw large inventories being built up in the channel and those inventories were being liquidated in FY22. But probably FY23 should see a rebound."

"We might also see some relief from raw material inflation, which will be good for all companies in the sector. Freight and freight cost is something that is bothering everybody. So that is another aspect to the pharma story, which can probably help companies across the board including DRL," Manchanda said.

DRL, last month, received emergency use authorisation for its Sputnik-V vaccine in India which may also work in the company's favour in the coming fiscal.

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First Published:May 20, 2022 1:17 PM IST