Nomura earlier had a price target of ₹1,600 on the Hyderabad-based drugmaker.
Why Does Nomura Like Dr. Reddy’s?
Nomura, in its note, said that Dr. Reddy’s Laboratories has sharpened its focus on branded generics and consumer business, a shift reflected in acquisitions, organic investments and recent changes to the management council.Over the past five years, unbranded generics have accounted for less than 10% of acquisition value, it said.
Dr. Reddy’s has also expanded its front-end commercial footprint, which is estimated to add to annual expenses of around 4% – 5% of sales, Nomura said.The strategic pivot for its branded business is further evident in recent changes in the management council — with MV Ramana’s expanded role after previously heading branded generics as well as the induction of India head into the management council and the redesignation of the EU head as head of consumer business, Nomura added.
Dr Reddy’s revenue mix change should support the sustainable earnings growth and in turn drive a re-rating of the stock’s valuation multiple, Nomura said.
Of the 41 analysts who have coverage on the Dr Reddy’s Laboratories stock, 19 have a “buy” rating, 10 have a “hold” rating and 12 have a “sell” rating.
Shares of Dr. Reddy’s Laboratories are trading 0.4% higher on Monday at ₹1,277.1. The stock has remained flat over the last month, this year so far, and over the last 12 months, with a decline of 1%, gains of 2% and a decline of 3% over these timeframes respectively.
Also Read: Reliance Industries shares could re-rate in this scenario, predicts Jefferies; Check latest price targets
