DR REDDY’S LABORATORIES SHARES
Dr Reddy’s laboratories shares, a Multinational Indian Based Pharmaceutical company, located in Hyderabad. The company was founded by Anji Reddy in the year 1984.
The company the share will be one among the portfolios of many investors. The company has a footfall in 48 countries currently.
In the FY2019-20, the company has achieved ever highest revenue of Rs. 18,193 Cr. Additional to which it has got 8 ANDA (Abbreviated New Drug Application) approvals with 97 ANDA and 2 NDA’s are pending approval.
They have launched almost 168 new products in the FY2019-20. In which 27 were launched in North America (NAG), 40 in Europe, 80 in Emerging markets, and 21 in India.
The company works with the vision of “Accelerating the Transformation” through a few key strategies,
· Leadership in chosen spaces.
· Operational Excellence and continuous improvement.
· Patient-centric – Product Innovation.
The share price has grown from Rs. 335 to Rs. 5110 in the last 20 years with a CAGR of 14.6%.
DR REDDY’S LABORATORIES SHARES – BUSINESS OVERVIEW:
The complete business is focused under the vision of “Accelerating the transformation” with
· Bringing Expensive medicines within the patient’s reach.
· Addressing unmet patient needs.
· Helping patients manage the disease better.
· Working with partners to help them succeed.
· Enabling and helping our partners ensure that our medicines are available where needed.
The company is peculiar in its business focusing on three categories,
· Global Generics (79.1% of Revenue)
· Pharmaceutical Services and Active Ingredients (14.8% of Revenue)
· Proprietary Products and Others (6.1% of Revenue)
The company is multinational focused on delivering the most demandable medicines and active pharmaceutical ingredients. The countries are categorized into regions.
The revenue by geographical regions are,
North America – Rs. 6470 Crores with 8% growth in FY2019-20 compared to the previous year
India – Generated Rs. 2890 Cr as revenue with 11% growth compared to the previous year
Europe – Revenue marked at Rs. 1170 Cr with an immense growth of 49%.
Emerging Markets– The revenue was Rs. 3280 Cr with a substantial growth of 14%.
Apart from this, the company has a focus on specific disease areas like oncology, autoimmune, cardio, and diabetes segments. Here, the company is focusing on delivering medicine for most demand and unmet areas at affordable prices.
The reason, the company is growing at a decent rate.
Let us see how the company is focusing on different product segments that come under the 3 operation categories.
Please check the review from fincareplan on Aarti Drugs Shares
The major product has 5 segments of focus. They are,
· Active Pharmaceutical Ingredients.
· Over the Counter.
· The biggest driver of business as a product.
· The company produces more than 400 high-quality generic drugs.
· It is offered at a reasonable price and reachable to all patients.
· The second-largest business driver.
· It specifically focuses on Oncology and autoimmune disorders.
· They are the global leaders in biologics production.
· Six products with a huge market share are in the global market.
· They are focusing on many pipelines of biologics on the oncology segment.
Active Pharmaceutical Ingredients:
· The API business and production are catered by huge global pharmaceutical leaders.
· The API business is majorly dependable on the US, Europe, Latin America, Japan, Korea, and a few other countries.
· They supply API for both Innovator and Generics producing companies.
· The company has high techno strength in producing Steroids, peptides, complex long-chain synthesis, and oncology API.
· The formulation products are delivering comfort to unmet needs in the current market.
· Involving themselves in developing a new dosage of the current drugs.
· Involving in the development of a new combination of synergistic medications, thereby increasing overall efficacy.
· Currently, having 3 NDA drugs filled in dermatology and neurology to be launched in the US.
Over the Counter:
· They also produce products that don’t require any prescription from a doctor.
· Recently, they have launched an energy drink.
· Focusing on OTC products in segments like pain management, dermatology, allergy management, gynecology.
DR REDDY’S LABORATORIES SHARES – FINANCIAL PERFORMANCE:
Please find the financial performance of the company over the last 5 years.
- Revenue has grown at a CAGR of 3.53% for the last five years. Lower than the industry average of 6.62%.
- EBIT has grown at a negative rate over the last five years. From 2941.6 Crit has come down to 1983.9 Cr.
- The asset has grown at the rate of a CAGR of 3.38%. At the same time, the borrowing has increased from Rs.1212 Cr in FY2018-19 to Rs. 1653 Cr in FY2019-20.
- PAT has grown at a CAGR of -2.81%. Lower than the Industry average of 2.76%
The company is suffering from decreasing in market share in the last 5 years, from 9.5% in 2015 to 8.22% in 2020.
In terms of financial performance, the company is detouring and had a small jump in FY2018-19 and gain fell down in FY2019-20.
But, the price of the shares has been at an all-time high. This cannot be a value share in terms of the price it is been trading.
DR REDDY’S LABORATORIES SHARES– FUNDAMENTAL ANALYSIS:
· Total number of shares: 16.62 Cr shares
· Market Capital: Rs. 85,023.64 Cr.
· Current Share price: 5114.05 (25th September 2020)
· Book Value: Rs. 938.71 Cr
· Price to Book Value: 5.36
· Earnings per Share (TTM): 117.29
· Price to Earnings: 43.6 (Too Expensive)
· Industry Average P/E: 38.75
· 5 years EPS Growth: -2.81%
· Dividend yield: 0.48%
· Debt to Equity Ratio: 0.03
· ROCE (Return on Capital Employed): 12.2%
· Interest Coverage Ratio: 16.8
· Current Ratio: 1.8
The shareholding patterns are from recent data of Q1’2020-21
· Promoters – 31.1%
· FII – 34.11%
· Domestic Financial Institutes – 0.1%
· Insurance Company – 5.17%
· Mutual Funds – 11.59%
· Other DII’s – 9.05%
· Retail Investors – 8.88%
EXCESS LIQUID CASH PER SHARE:
· Fixed Assets
§ Investments – 32.8 Cr
§ Other Financial Assets – 79.3 Cr
· Current Assets
§ Investments – 2368.7 Cr
§ Cash & Cash Equivalent – 205.3 Cr
§ Other Financial Assets – 337.7 Cr
§ Derivatives Instruments – 110.5 Cr
Total Assets: 3134.4 Cr
Total Liabilities: 7626.5 Cr
Excess Liquid cash: -4493.1 Cr
Excess Liquid cash per share: -270.33 per share
The current EPS (TTM) is 117.29, the revenue growth is negative from last year’s comparison. Even 5 Years growth is just 3.53%.
Even if we expect the 2 times of 5 years of revenue growth, the intrinsic value will be 1500. The current value is 241% overvalued than the intrinsic value.
From 2000, the company has provided 1 split of FV 10 to FV 5.
Also, it has shared its shareholders on the profit in terms of dividend.
The total dividend per share paid from 2000 to 2020 was Rs. 237.5 per share.
This year, they paid out Rs. 25 per share as dividend for FY2019-20.
The dividend paid is just 20% of the Earnings per share.
· The Debt Equity ratio is decreasing and marginally nil debt.
· Mutual funds holdings have increased.
· Maintained the sales revenue in Q1’2020-21
· Return on assets is increasing year on year.
· Higher than industry average current ratio.
· Assets increasing year on year.
· Book Value is increasing in the last 2 years.
· Promoters keep on pledging their shares.
· Red Flags – Firms linked to ongoing regulatory investigations or legal cases
· Negative growth in last year and 5 years of performance.
· Very high P/E ratio of more than 40 times the earning, when revenue grows by 3.5% per year.
· Current price is 241% higher than the intrinsic value.