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Dr Reddy’s Shares Recover 4% on Hopes of Higher R&D Spend

The stock also got a boost from the company’s announcement in the post-earnings call stating that Dr Reddy’s plans to spend up to $300 million on research and development (R&D) during the current financial year.

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Updated:May 21, 2019, 3:49 PM IST
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Dr Reddy’s Shares Recover 4% on Hopes of Higher R&D Spend
File image of Dr. Reddy's Laboratories Ltd logo. Image: Twitter
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Dr Reddy’s Laboratories shares jumped as much as 4% on Tuesday as investors indulged in some value-buying after the stock corrected over 6% in Monday’s trade.

The stock also got a boost from the company’s announcement in the post-earnings call stating that Dr Reddy’s plans to spend up to $300 million on research and development (R&D) during the current financial year.

Dr Reddy’s President, CFO and global head (HR) Saumen Chakraborty said that the company has spent $226 million on R&D during the last fiscal year as against $264 million in FY18.

“We expect the overall R&D for FY20 to be in the range of $250 million to $300 million,” he said replying to a query.

The March quarter revenue for Dr Reddy’s rose to Rs 4,017 crore from Rs 3,535 crore, but was below analyst estimates. Net profit rose 44% year-on-year to Rs 434.40 crore in the March quarter compared with Rs 302.20 crore in the same period last year, but was down 10% when compared with the previous quarter.

The company’s gross margin for the March quarter stood at 52.4%, down 100 basis points year-on-year and 150 basis points sequentially. Margins were hit by adverse forex rate, change in the business mix and higher manufacturing overheads.

After the fourth quarter results, Prabhudas Lilladher revised its outlook positively for the company to a ‘hold’ with a target price of Rs 2,997. Motilal Oswal also shifted its estimates to a ‘neutral’ stance with a target price of Rs 2,700, while Elara Capital reiterated its view with ‘reduce’ rating and a target price of Rs 2,759.

At 2:47pm, Dr Reddy’s shares were trading at Rs 2,670.40 apiece, up 3.1%, on BSE.

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