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Result Analysis: Dr Reddys Q1 Net Profit Dives By 76.29%


The big boy of the pharma sector, Dr. Reddys Laboratories has come out with its Q1 results for 2016. The results have not been taken well by investors and the stock is down by 14.61% in two consecutive trading sessions.
Dr. Reddy’s revenue is down by 14.52% compared to Q1 2015. However the net profits nose dived by 76.29% (compared to Q1FY16).

The other major analysis are:

  • The operating margin has reduced big time to 4.54% compared to 20.88% in Q1FY16. Such drastic decline is due to the forex losses incurred to the tune of Rs 384.5 Crs and also provisioning of Rs 462.1 Crs for its Venezuelan subsidiary.
  • The company has reduced its finance costs by 47.33% in relation to same quarter last year.
  • Dr Reddys have paid 26.88% of PBT as tax, where as for previous year same quarter they paid almost 22.71% of PBT as tax.
  • The companies Global Generics segment has been the major bread winner for the company, with nearly 90% of gross profits coming from it.
  • The boost in EPS despite lower net profit is mainly due to a buyback – the company bought back 50,77,504 shares worth Rs  1569.4 Crs.

Other Notes:

The company has received an FDA warning letter on 5th Nov 2015 for its plant Andhra Pradesh and Telangana. Dr Reddy’s had said it has filed a response to the FDA on 7th Dec 2015 and has been updating the progress of remedies undertaken periodically and is hoping the issue will be resolved.
Read our detailed Posts on Dr Reddys and its FDA hurdles:

DrReddys Q1FY17 Results
Dr Reddys Q1FY17 Share Price Movement
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Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.


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