Dr Reddy’s Laboratories share price rallied over 4 percent to hit a 52-week high of Rs 4,492.40 on Thursday after the company’s Q1FY21 earnings beat analysts’ estimates. The stock had jumped 6 percent in the previous trading session after the earnings release. At 10:30 am, the shares traded 4.37 percent higher at Rs 4,487.95 on the BSE.

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The company reported a net profit of Rs 579 crore in the quarter ended June 2020, as against CNBC-TV18 analysts' estimates of Rs 513 crore. Revenue from operations in Q1FY21 rose 15 percent to Rs 4,418 crore from Rs 3,843 crore, compared year on year. Revenue was also higher than the expectations of Rs 4,179 crore.

Dr Reddy's global generics business rose 6 percent to Rs 3,507.5 crore from Rs 3,298.2 crore, YoY, primarily by Europe and Emerging Markets. Europe generics business witnessed a growth of 48 percent to Rs 355.1 crore as against Rs 240.4 crore.

Elara Capital

The brokerage expects strong momentum in revenue growth is sustainable.

“Revenue growth of 15 percent in Q1 was commendable, we believe, despite weak India and US sales, which should recover from Q2,” Elara Capital said.

The brokerage increased its FY21E EPS by 8 percent and FY22E EPS by 5 percent. At the CMP, the stock trades at 23x FY22E P/E.

Elara Capital maintained an Accumulate rating on Dr Reddy’s Labs’ stock and raised the target price to Rs 4,725 from Rs 4.300 earlier on 25x (from 24x) FY22E P/E.

Prabhudas Lilladher

Prabhudas Lilladher downgraded the stock to Hold from Accumulate due to limited upside potential at current valuation. It retained its earnings estimates and target price of Rs 4,326 (PE 24x FY22E).

“Dr reddy’s Labs continues to be one of the best companies in large-cap pharma space structurally, though there is limited headroom for a further upgrade in earnings estimate and PE expansion. However re-rating in the near-term could be possible with the early launch of Nuvaring and Copaxone, sustainable growth of PSAI sales, India formulations growing above 15 percent and favorable hearing on gRevlimid,” the brokerage said.

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