Dr.Reddy’s Labs tastes bitter

Dr.Reddy’s Labs is down in the red since morning, going down over 6% to Rs.2462 levels and remains now also around same levels.

The company declared its Q1FY18 performance yesterday after market closure and the numbers were very disappointing, much lower than all estimates.

Its net profit fell by a sharp 57% (YoY) at Rs.66 crore on account of falling topline in USA and also in India. Though revenue rose 3% at Rs.3333 crore, it was mainly on account of better performance, up 34% from emerging markets, led by Russia. The Russian geography contributes more than 50% of emerging market sales – Russia alone grew 48%. Some new launches also helped offset the poor USA and India sales.

The company has stated, “Headwinds in the form of price erosion due to US customer consolidation continue, a lower contribution from new product launches in the US and the GST implementation in India also impacted our performance.”

North America business was lower by 4% at Rs 1495 crore and India dropped 10% to Rs 469 crore, mainly due to destocking on account of GST transition. Europe was up 28% at Rs 207.5 crore.

Following this, most brokerage houses have turned cautious on the stock and that has turned the overall mood on the counter to negative.