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BYTENNETI SHIVAJICHINTALA PRUTHIVIRAJSUNDARA RAGHAVENDRANKRUTARTH GOKANISIDDHARTH BORADE

Introduction to DRLFounded in 1984 by Anji Reddy, an entrepreneur and scientist Acquisition of Benzex laboratories in 1988Dr Reddys research foundation (DRF) was established in 1993Merger with Cheminor Drugs in 2000 was a big leap, rose as the third largest pharmaceutical company.GV Prasad was appointed the executive vice-chairman and CEO while Satish Reddy became COO.Acquisition of Betapharm in 2006 (US$ 570 millions)

Dr.Reddy's Laboratories LtdParent CompanyDr.Reddy's Laboratories LtdCategoryPharmaceuticalsSectorHealth careTagline/ SloganLife. Research. HopeUSPStrong vertically integrated portfolio of products, businesses & geographiesSTPProduct portfolioActive Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimiler, differentiated formulations and News Chemical Entities (NCEs)Target GroupHealthcare professionals, retail outletsPositioningCommitted to providing affordable and innovative medicines for healthier lives

Industry Classification

Report by

DR.REDDYS STOCK DATA

Compounded annual growth rate (CAGR)

US business expected to grow at CAGR of 15.4% in FY16P-18E

We expect revenues to grow at a CAGR of 10.6% to | 18911.7 crore in FY16P-18E, on the back of growth in the GG segment.

The GG is likely to grow at a CAGR of 12.4% to | 16184.9 crore during the same period.

We expect US revenues to normalise from H2FY17 either by successful resolution of warning letter or site transfers.

India is showing promising growth as well with a recalibrated approach and the recent acquisition(UCBs India business) bodes well for the future.

Russia, RoW and the PSAI segments but continue to pose challenges for being lumpy and volatile.

INDUSTRY PHARMA CMP (as on 25 Oct 2016) Rs 3,201 Target Price Rs 3,150Dr Reddys NEUTRAL

US generics: Revenues improved sequentially to ~US$ 241mn (v/s US$ 232mn in 1Q).

primarily driven by four new launches during the quarter. With a few more scheduled drug launches, like gGleevec. and a ramp up in existing products,

2HFY17 is likely to be better than 1HFY17. The approval for gCopaxone is also on track and DRRD is likely to re-file the DMF in 3QFY17.

Re-inspection likely in 2HFY17: DRRD has already sent a request to US FDA for re-inspection of the three facilities under warning letters. Earlier clearance could substantially improve our estimates for FY18/FY19E.

Slight recovery in margins: Absence of remediation costs in 2Q has led to a slight recovery in EBITDA margins at 16.6% versus in 11.7% in 1QFY17.

Adjusted for NPPA provision of Rs 344mn in 2Q, margins were at 17.8%. We expect margins to revert to 20% levels in 2HFY17.

14 (Owners point of view)Profitability RatiosParticularsMar '16Mar '15 Return on Equity Ratio0.370.38Earnings Per Share79.3978.57Dividend Per Share2020Dividend Payout Ratio Net Profit25.1320.29Dividend Payout Ratio Cash Profit16.9915.7

Return on Equity Ratio=Net Profit after Tax / Net WorthEarning per Share = Net Profits available to Equity Shareholders/ Number of Equity SharesDividend Per Equity Share = Total Profits distributed to Equity Shareholders/ Number of Equity Shares Dividend Pay-Out Ratio = Dividend Per Equity Share / Earning Per Share

Profitability Ratios

(Based on investments)ParticularsMar '16Mar '15Return On Capital Employed(%)13.6115.43Return on Assets Excluding Revaluations680.24624.13Return on Assets Including Revaluations680.24624.13

Return on Capital Employed= Net Profits after Tax / Capital Employed *100

Return on Assets= Net Profits after Tax / Average Assets *100

(Based on Sales)Profitability Ratios ParticularsMar '16Mar '15Gross Profit Margin(%)17.1918.98Net Profit Margin(%)13.2616.77Operating Profit Margin(%)23.5523.88

Gross Profits Ratio = Gross Profits / Sales *100

Operating Profits Ratio = Operating Profits / Sales *100

Net Profits Ratio = Net Profits / Sales *100

Profitability Ratios

17(Based on share price)ParticularsMar '16Mar '15Price Earning Ratio43.7531.75Yield Per share0.130.11Book Value680.24624.13

Price Earning Ratio = Market Price per Share * / EPS

Yield Per Share = Dividend Per Share / Market Price Per Share*

Book Value Per Share= Equity Share holders Funds/ Number of Shares

Capital Structure RatiosParticularsMar '16Mar '15Debt ratio9.159.87Equity Ratio92.191.88Debt Equity Ratio0.270.29

EQUITY RATIOFormula = Shareholders Equity /Total Capital EmployedDEBT RATIOFormula = Total Debt/ Total Capital EmployedDEBT TO EQUITY RATIOFormula = Total Debt/ Shareholders Equity

Conclusion:After observing all the reports we got an idea that the Dr.Reddys Labs Ltd., is a profitable firm. Because through out the analysis of years, we found that the company is getting profitable return on short term and long term investment, The Company share price is Rs.3046.90/- and their profit margin has been increased as well and they are in the position to pay their debts with in their resources.

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