Rs 40/Share Dividend: Large Cap Pharma Stock To Trade Ex-Dividend Tomorrow

Dr. Reddy's Laboratories Limited is a large-cap pharma company that has a record of consistently declaring dividends for the last 5 years. Dr. Reddy's Laboratories Ltd. has issued 25 dividends since September 7, 2000, according to Trendlyne statistics. Market watchers should take note that the company has declared its highest-ever dividend payment for FY23, which is 800%, and that the stock will begin trading ex-dividend tomorrow.

The Board of Directors have "Recommended a final dividend of Rs. 40/- (800%) per equity share of Rs. 5/- each for the financial year 2022-23. The dividend will be paid on or after five days from the date of declaration of the final dividend by the shareholders at the 39th Annual General Meeting (AGM)," said Dr. Reddy's Laboratories in a stock exchange filing.

As per the data available on BSE, Dr. Reddy's Laboratories has fixed 11 July 2023 as the ex-dividend date and due to the T+1 settlement type of the company, the record date is also falling on the same day.

For the financial year ended March 2023 or FY23 Dr Reddys Laboratories has declared an annual equity dividend of Rs 70 per share. At the current share price of Rs 5162.25 this results in a dividend yield of 1.35%.

The company reported a consolidated net profit at Rs 959.20 crore for the March 2023 quarter up by 996% YoY compared with Rs 87.50 crore in the same quarter last year. Revenue for Q4FY23 rose 16 per cent to Rs 6,296.80 crore compared with Rs 5,436.80 crore in Q4FY22. Ebitda for the quarter jumped by 26% to Rs 1,631 crore. PAT for the full fiscal year FY23 was Rs 4,507 crore, an enormous 91% YoY growth. Meanwhile, EBITDA totalled Rs. 7,308 crore. In comparison to FY22, revenue increased by 15% to Rs. 24,588 crore. Dr. Reddy's Laboratories is yet to declare its Q1FY24 results.

The shares of Dr Reddys Laboratories opened today on the BSE at Rs 5254.95 apiece. The stock made a 52-week-high of Rs 5,272.35 on (07/07/2023) and a 52-week-low of Rs 3,996.10 on (19/09/2022). During Q4FY23, the company reported promoter shareholding of 26.69%, FIIs stake of 27.25%, DIIs stake of 23.05%, public stake of 22.78% and others stake of 0.22%.

Dr. Reddy's Laboratories Share Price Target

"Dr. Reddy's has had one of the fruitful years in FY2023 as it experienced ~46.4% y-o-y rise in adjusted net income to Rs. 4,083 crore, excluding unusual gains related to the sale of non-core brands worth Rs. 494 crore and impairments costs worth Rs. 70 crore. Reported PAT increased by ~106.5% y-o-y to Rs. 4,507 crore for the year. This can be attributed to decent growth in the U.S. and Europe, driven by high value product launches and traction in the base business. Additionally, cost-efficiency measures implemented during the year helped the company to enhance its profitability. Growth in U.S. revenue at ~35.8% y-o-y to Rs. 10,170 crore was driven by 25 new product launches, including Lenalidomide (gRevlimid), Sorafenib, and Pemetrexed Injection, partially offset by price erosion in key products such as Icosapent Ethyl Capsules (gVascepa) and Vasopressin (gVasostrict).

At the same time, recent developments such as the company's newly announced foray into the trade generics business in India and receipt of a onetime litigation settlement income of CAD9 million (Rs. 56 crore) from Janssen Group in Q1FY2024 incite marginally upwards revision in earnings estimates for FY024E and FY2205E. We revise our revenue CAGR to ~6.8% from ~6.3% CAGR and earnings growth estimate to ~10.2% CAGR from ~9.1% CAGR over FY2023-FY2025E," said broking firm Sharekhan.

"Dr. Reddy's FY2023 performance was one of the best in recent times, driven by the launch of gRevlimid, wherein it had 180 days' exclusivity for two strengths until the end of Q4FY23. Although the recent quarterly market share data for key existing products such as gRevlimid, gVascepa and gVasostrict point toward a marginally weak outlook for the North American market, we believe gRevlimid will continue to remain a key product until January 2026 and the acquisition of 45 prescription products from Mayne Pharma and ~25-30 new complex product launches including injectables will continue to drive North America's revenue at an ~8.2% CAGR over FY2023-FY2025E.

The company's recent foray in the trade generics business in India and receipt of settlement income of CAD9 million or Rs. 56 crore in Q1FY2024 bode well for boosting earnings growth marginally to a ~10.2% CAGR from ~9.1% CAGR before over FY2023-FY2025E. The stock is trading at an attractive valuation level of ~18.4x/~17.4x its FY2024E/ FY2025E revised EPS estimates, while offering strong ROE (~17.5%) and balance sheet for the underlying business. We, therefore, revise upwards the PT to Rs. 5,963 and upgrade the rating to BUY from Hold," said Sharekhan in a report.

Disclaimer

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