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Dr Reddy’s saw a year-on-year growth of 16% in the PSAI sector

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Revenues from India were at INR 6.1 billion and year-on-year growth was 30 per cent

Dr Reddy’s Laboratories recently announced its consolidated financial results for the quarter ended June 30, 2018 under International Financial Reporting Standards (IFRS).

Commenting on the results, Co-chairman and CEO, GV Prasad said, “I am pleased with our first quarter results, aided by the launch of gSuboxone. Our focus on operational efficiencies has helped in significantly improving our margin profile. Looking ahead, while we may continue to experience price erosion in the North America Generics market, we will also continue to drive growth and cost efficiencies, at the same time, enhancing our quality management systems and building healthy portfolios across the markets we serve.”

Particulars Q1 FY19 Q1 FY18 YoY
Gr %
Q4 FY18 QoQ
Gr%
($) (Rs.) ($) (Rs.) ($) (Rs.)
Revenues 543 37,207 484 33,159 12 516 35,349 5
Cost of Revenues 241 16,479 235 16,062 3 240 16,454 0
Gross Profit 303 20,728 250 17,097 21 276 18,895 10
Operating Expenses
Selling, General & Administrative expenses 177 12,106 172 11,763 3 176 12,067 0.3
Research and Development expenses 61 4,157 74 5,075 (18) 63 4,348 (4)
Other operating (income) / expense (4) (303) (3) (194) 56 (2) (167) 80
Results from operating activities 70 4,768 7 453 952 39 2,647 80
Net finance (income) / expense (2) (156) (3) (221) (30) (15) (1,032) (85)
Share of (profit) / loss of equity accounted investees (1) (83) (1) (98) (15) (1) (69) 20
Profit before income tax 73 5,007 11 772 548 55 3,748 34
Income tax expense 7 446 3 181 146 11 726 (39)
Profit for the period 67 4,561 9 591 672 44 3,022 51
            –               –                –  
Diluted Earnings Per Share (EPS) 0.40 27.45 0.05 3.56 672 0.27 18.18 51
As % to Revenues Q1 FY19 Q1 FY18 Q4 FY18
Gross Profit 55.7 51.6 53.5
SG&A 32.5 35.5 34.1
R&D 11.2 15.3 12.3
PBT 13.5 2.3 10.6
PAT 12.3 1.8 8.5

EBITDA Computation

Particulars  Q1 FY19  Q1 FY18  Q4 FY18
 ($)  (Rs.)  ($)  (Rs.)  ($)  (Rs.)
 Profit before Income Tax 73 5,007 11 772 55 3,748
Interest (income) net* (1) (46) (3) (211) (15) (1,001)
Depreciation# 32 2,214 29 2,008 31 2,109
Amortization# 13 896 12 791 13 921
EBITDA 118 8,071 49 3,360 84 5,777

 

* Includes income from Investments       # includes impairment charge

Key Balance Sheet Items

Particulars As on 30th June, 2018  As on 31st March 2018 As on 30th June 2017
 ($)  (Rs.)  ($)  (Rs.)  ($)  (Rs.)
Cash and cash equivalents and other investments 249 17,047 344 23,517 213 14,572
Trade receivables (current & non-current) 703 48,095 596 40,786 601 41,140
Inventories 460 31,498 425 29,089 410 28,095
Property, plant and equipment 833 57,020 845 57,869 842 57,611
Goodwill and Other Intangible assets 720 49,289 710 48,610 709 48,564
Loans and borrowings (current & non-current) 793 54,273 741 50,714 737 50,462
Trade payables 216 14,816 234 16,052 193 13,225
Equity 1,905 1,30,430 1,847 1,26,460 1,803 1,23,423

 

Revenue Mix by Segment

                                                                           Particulars Q1 FY19 Q1 FY18 YoY
Growth %
Q4 FY18 QoQ
Growth %
 (Rs.)  (Rs.)  (Rs.)
Global Generics 30,636 27,455 12 27,836 10
    North America 15,903 14,946 6 14,487 10
    Europe 2,016 2,075 (3) 1,711 18
    India 6,074 4,687 30 6,138 (1)
    Emerging Markets 6,643 5,747 16 5,500 21
Pharmaceutical Services and Active Ingredients (PSAI) 5,409 4,651 16 6,251 (13)
Proprietary Products & Others 1,162 1,053 10 1,262 (8)
Total 37,207 33,159 12 35,349 5

ep-dr-reddys-fy19salsmix

Segmental Analysis

Global Generics (GG)

  • Revenues from GG segment at INR.30.6 billion. Year-on-year growth of 12 per cent, primarily driven by contributions from emerging markets, India and launch of gSuboxone in the US. Sequential growth is 10 per cent.
  • Revenues from North America at INR15.9 billion. Year-on-year growth is 6 per cent. Sequential growth of 10 per cent, driven by contribution from new products, primarily gSuboxone, and partly offset by competitive pressures on some of the key molecules.
  • As of June 30,2018, cumulatively 112 generic filings are pending for approval with the USFDA (109 ANDAs and 3 NDAs under 505(b)(2) route). Of these 109 ANDAs, 61 are Para IVs out of which 30 have ‘First to File’ status.
  • Revenues from emerging markets at INR.6.6 billion. Year-on-year growth is 16 per cent. Sequential growth is 21 per cent.
  • Revenues from Russia at INR 3.8 billion. Year-on-year growth of nine per cent. Constant currency growth is 14 per cent. Growth primarily driven by new launches and volume traction in some of the key molecules.
  • Revenues from other CIS countries and Romania market at INR1.2 billion. Year-on-year growth of 37 per cent, primarily driven by new launches across markets.
  • Revenues from Rest of World (RoW) territories at INR1.7 billion. Year-on-year growth of 17 per cent, primarily driven by new markets and volume traction in base business.
  • Revenues from India at INR6.1 billion. Year-on-year growth of 30 per cent. Q1FY18 was impacted due to GST transition.
  • Revenues from Europe at INR2.0 billion. Year-on-year decline of 3 per cent, primarily on account of higher price erosion in some of the key molecules.

Pharmaceutical Services and Active Ingredients (PSAI)

  • Revenues from PSAI at INR 5.4 billion. Year-on-year growth of 16 per cent. Sequential decline is 13 per cent.
  • During the quarter, two DMFs with the USFDA were filed.

Proprietary Products (PP)
Revenues from PP at INR 726 million. Year-on-year growth of 42 per cent, majorly driven by volume traction coupled with better realizations in some of the key molecules. Sequential decline is 14 per cent. Q4FY18 had a one-time out licensing income of INR160 million, received from Encore Dermatology.

Income Statement Highlights:

  • Gross profit margin at 55.7 per cent.
    Improved by ~230 bps sequentially and ~410 bps over that of previous year
    Improvement primarily aided by contribution from new launches including gSuboxone, leverage benefit, better product mix coupled with favorable foreign exchange. This was partially offset by higher price erosions due to channel consolidation and increased competitive intensity in some of our key molecules in the US.
    Gross profit margin for GG and PSAI business segments are at 61.2 per cent and 21.9 per cent respectively.
  • SG&A expenses at INR12.1 billion, marginal increase of 3 per cent on a year-on-year basis and remained flat sequentially.
  • R&D expenses at INR4.2 billion. As per cent to Revenues- Q1 FY19: 11.2 per cent | Q4 FY 18: 12.3 per cent | Q1 FY18: 15.3 per cent. Decrease is primarily on account of quarterly variation in the milestone related payments and other spend activities. Focus continues on building complex generics, biosimilars and differentiated products pipeline.
  • Net Finance income at INR156 million compared to INR 221 million in Q1FY18.
  • Profit after Tax at INR4.6 billion. The effective tax rate is 8.9 per cent for the quarter. This is lower primarily on account of profit mix and favourable resolutions of certain tax related litigations pertaining to earlier years. The effective tax rate in Q1FY18 was 23.5 per cent.
  • Diluted earnings per share is at INR 27.45
  • Capital expenditure is at INR 2.3 billion.

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