Buy stocks of Dr Reddys Labs; target of Rs 1824

Dr. Reddy's Laboratories Ltd:-

“Established in 1984, Dr. Reddy's Laboratories Ltd. is an integrated global pharmaceutical company, committed to providing affordable and innovative medicines for healthier lives. Dr Reddy's started its operation in the Active Pharmaceutical Ingredients (API) segment, with a single drug in 60 ton facility near Hyderabad. In 1986 it shipped its first consignment of Methyldopa drug to West Germany. During FY11, the company launched 135 new generic products, filed 107 new product registrations and filed 56 DMFs globally. April 11, 2001, the symbolic bell rang and Dr. Reddy's became the first pharmaceutical company in the Asia-Pacific, outside Japan, to be listed on NYSE. Dr. Reddy’s Lab is the fastest Indian Pharma Company to cross $1 billion in revenues.”

“The company’s net profit jumps to Rs.3359.50 million against Rs.2627.40 million in the corresponding quarter ending of previous year, an increase of 27.88%. Revenue for the quarter rose 28.42% to Rs.25406.10 million from Rs.19783.20 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.19.81 a share during the quarter, registering 27.80% increase over previous year period. Profit before interest, depreciation and tax is Rs.3917.40 millions as against Rs.19783.20 millions in the corresponding period of the previous year.”

“India's pharmaceutical sector is gaining its position as a global leader. The pharma market in India is expected to touch US$ 74 billion in sales by 2020 from the current US$ 11 billion, according to a PricewaterhouseCooper (PwC) report. At the current market price of Rs.1614.00, the stock P/E ratio is at 18.14 x FY13E and 17.09 x FY14E respectively. Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs 88.98 and Rs.94.46 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 13% over 2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 15.02 x for FY13E and 14.20 x for FY14E. Price to Book Value of the stock is expected to be at 3.77 x and 3.09 x respectively for FY13E and FY14E. The first quarter witness a healthy increase in overall sales as well as profitability on account of Launching of new products and emerging markets, an enhanced store network and robust pharma businesses.”

“We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 1824 for medium to long term investment,” says Firstcall Research report.