Dr Reddys

Dr.Reddy’s Lab put in a very poor show for Q1FY17 and post this, most brokers and analysts downgraded the stock. For the first quarter, the company’s consolidated net profit falling by a sharp 76% (YoY) at Rs.153 crore. This was mainly on account of a dismal quarter in USA, loss of business in Venezuela, price erosion, warning letters from US FDA delaying new launches and overall very weal operational matrix. Its revenue also declined 14% at Rs.3222 crore. In fact all its markets- Europe, India and other Emerging markets, in global generics as well as PSAIs have shown a de-growth.

Its R&D expenses as a percentage of sales have risen from 11.7% to 14.8%. EBITDA for the quarter came in at Rs.394 crore, down 60% and EBITDA margins slipped from 26.5% to 12.3%.

The market is more spooked because the current quarter  saw a 20% fall in its US business topline and its EBIT margins fell to 4%. But more than this, the management has already warned that coming months do not really look all that great as apart from USA, its other businesses are also showing troubled headwinds.