Dr. Reddy's Laboratories reports Q1 results: Profit dips, revenue soars

Dr. Reddy's Laboratories reports Q1 results: Profit dips, revenue soars
27 Jul 2024

Dr. Reddy's Laboratories, a Hyderabad-based pharmaceutical giant, reported a slight 0.8% year-on-year (YoY) dip in its net profit for the first quarter (Q1) of FY25, to ₹1,392 crore.

Despite this minor decrease in profit, the company saw a significant 13.9% YoY increase in revenue to ₹7,673 crore.

The firm attributed this revenue growth to an uptick in global generic medicine sales in North America and India.

Gross margins rose to 60.4%
Business strategy

The company's gross margins improved during the quarter, rising to 60.4%, an increase of 170 basis points YoY and 183 basis points sequentially.

This was due to a favorable product mix and overhead leverage, partially offset by price erosion in generics markets.

"Our growth & profitability was mainly driven by our generics business," said Dr. Reddy's Co-Chairman and MD GV Prasad, adding that the company continues to strengthen its core businesses, with strategic investments in biologics, consumer healthcare and innovation.

Global generics business records growth, India revenues increase
Market expansion

The global generics business saw a 155% YoY growth during the quarter, primarily volume led, helped by new launches and integration of recently in-licensed vaccine portfolio in India. However, this was partially offset by price erosion.

In India, revenues grew by 15% YoY to ₹1,330 crore due to new product launches including the recently in-licensed vaccine portfolio.

The company launched 13 new brands during the quarter and gained exclusive rights to promote and distribute Sanofi's vaccine brands.

Operating performance contracts, R&D expenses increase
Operational challenges

Dr. Reddy's operating performance saw contraction as EBITDA margin came in at 28.2%, lower than 29% reported in same quarter last year.

This was largely due to increased research and development expenses, which made up 8.1% of total revenue, up from 7.4% in year-ago period.

The company's board also approved a split of equity shares in the ratio of 1:5 and a fund infusion by way of investment in preference shares of Dr. Reddy's Laboratories SA, Switzerland, a wholly-owned subsidiary.

Dr. Reddy's plans major acquisition, shares end higher
Future plans

The company plans to use the fund infusion for the acquisition of Nicotinell and related brands, by way of acquiring all quotas of Northstar Switzerland.

This move is part of a strategic investment in preference shares of Dr. Reddy's Laboratories SA, Switzerland, a wholly-owned subsidiary, up to an amount of £500 million.

Shares of Dr. Reddy's Labs ended Friday's session 0.55% higher at ₹6,892 on BSE.