Dr Reddy’s Announces Financial Results for the Second and First Half of FY23

EBITDA is Rs 19.3 billion and EBITDA margin is 30.6%

Dr Reddy’s has announced its consolidated financial results for the three and six months ending September 30, 2022. Highlights of the results are as follows, according to a statement released by the company last week.

  • Revenue from the GG segment amounted to Rs 55.9 billion. There was 18% annual growth and 26% sequential quarterly growth driven by the launch of lenalidomide capsules in the U.S. market (as part of the limited volume settlement with the innovator) and sequential quarterly improvement in Russia. Sales. However, the growth was partially offset by price erosion in the company’s generic markets and a higher base due to sales of COVID products in the prior year.
  • Revenues from North America amounted to Rs 28 billion. Year-over-year growth was 48% and sequential quarterly growth was 57%, driven by the launch and scale of new products and favorable exchange rate developments, which were partly offset by price erosion of some of the company’s key molecules.
  • Revenue from Europe amounted to 4.2 billion rupees, with annual growth of 2% and sequential quarterly growth of 1%.
  • India revenue was 11.5 billion rupees, with 1% annual growth impacted due to the higher base in the first quarter of FY22, which included the contribution from COVID product sales . India’s sequential quarter was down 14%, primarily due to a high base impact, as the company recognized revenue from the divestment of a few non-core brands in the first quarter of FY23.
  • Emerging Markets revenue was Rs 12.2 billion with an annual decline of 6% and sequential quarterly growth of 36%.
  • Revenue for Russia amounted to Rs 5.9 billion. Year-on-year growth of 4% was driven by new product launches, higher selling prices and favorable foreign exchange developments, partially offset by lower base volumes. The sequential quarterly growth of 85% was primarily due to the lower sales base in Q1 FY23, which was impacted by the normalization of channel inventory.
  • Revenue from other CIS countries and Romania was Rs 2.2 billion with a 1% year-on-year decline due to lower base volumes and unfavorable exchange rate developments , partly offset by higher selling prices and new product launches. Sequential quarterly growth of 13% was driven by higher base volumes and new product launches, partially offset by unfavorable foreign exchange developments.
  • Revenue from Rest of the World (RoW) markets amounted to Rs 4.1 billion. The 18% year-over-year decline was due to lower sales of COVID products in the current quarter compared to last year, lower selling prices, which was partially offset by the launch of new products. Sequential growth of 6% was driven by new product launches, partially offset by lower base volumes and selling price of some of our products.
  • Pharmaceutical Services and Active Ingredients (PSAI) revenue was Rs 6.4 billion with a year-on-year decline of 23% and a sequential decline of 9%. The year-over-year decline was primarily due to lower volumes due to a higher base in the second quarter of FY22, with sales of COVID products, partially offset by sales of new products and favorable exchange rates. The sequential decline was primarily due to lower volume traction for some of the products, partially offset by sales of new products.

In addition, according to the statement, highlights of the company’s income statement are as follows:

  • Gross profit margin for the quarter was 59.1%. It increased approximately 565 basis points from a year ago and approximately 920 basis points sequentially, primarily due to product mix (including new products), production-linked incentive program (PLI), which was partially offset by price erosion and the provision made on inventory of COVID products. The gross profit margin of the GG and PSAI business segments is 65.4% and 3.6%, respectively. PSAI’s gross profit margin was impacted due to the provision of COVID inventory and the negative impact of manufacturing overhead which is at similar levels on a lower sales base.
  • Selling, general and administrative (SG&A) expenses amounted to 16.6 billion rupees, increased by 4% on an annual basis and 7%, sequentially, in line with the growth of the business.
  • Research and development (R&D) expenditure amounted to Rs 4.9 billion.
  • Other operating income amounted to Rs 0.3 billion against Rs 1.7 billion in Q2 FY22. The second quarter of FY22 was higher due to the recognition of revenue for the sale of rights to the anti-cancer agent E7777 (denileukin diftitox).
  • Net finance charges amounted to Rs 156 million compared to net finance income of Rs 319 million in Q2 FY22.
  • Pre-tax profit was Rs 16.1 billion, up 27% year-on-year and 10%, sequentially.
  • Profit after tax was Rs 11.1 billion and the effective tax rate was 30.9% for the quarter.
  • Diluted earnings per share is Rs 66.89.

In addition, the press release also mentions other highlights of the quarter. These are as below:

  • EBITDA is 19.3 billion rupees and EBITDA margin is 30.6%.
  • Capital expenditure amounts to Rs 2.5 billion.
  • Free cash flow is Rs 5.8 billion.
  • The company’s net cash surplus stands at Rs 13.7 billion as of September 30, 2022. Therefore, the net debt to equity ratio is (0.07).

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