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Dr Reddy's posts better than expected Q3 numbers but concerns remain

A day earlier, the company had informed the bourses that a re-inspection carried out by the German regulator at the company's formulations making plant at Bachupally, Hyderabad, had led to the EU GMP non-compliance getting withdrawn by the government of Bavaria and this means the plant could restart dispatching its approved products to the European Union.

twitter-logo E Kumar Sharma        Last Updated: January 26, 2018  | 10:10 IST
Dr Reddy's posts better than expected Q3 numbers but concerns remain

There were two positive developments at Dr Reddy's that were hard to miss when the company's CFO Saumen Chakraborty and COO Abhijit Mukerjee announced the company's financial results for the third quarter (Q3) and for the first nine months. One: "The company had some one offs in the quarter but the US numbers have turned out to be better than what some of us expected, especially in the US," is how a leading analyst put it.

Second: A day earlier, the company had informed the bourses that a re-inspection carried out by the German regulator at the company's formulations making plant at Bachupally, Hyderabad, had led to the EU GMP non-compliance getting withdrawn by the government of Bavaria and this means the plant could restart dispatching its approved products to the European Union. But then, it was not as if the company was totally out of the woods for challenges remain.

It posted, what analysts, called relatively weak numbers for most regions outside US like Europe, emerging markets and even India, though there was a 3 per cent year-on-year growth in India. Then, there was a 29 per cent de-growth year-on-year in the profit at Rs 334.4 crore as against Rs 470.1 crore earlier.

But then, Chakraborty reminded that during Q3 FY18, the 'Tax cuts and jobs act of 2017" in the US, which had meant a hit for many Indian companies  including Dr Reddy's for the "consequent to this enactment in the US, the deferred tax assets and liabilities of its US entity were remeasured resulting in a one-time charge of Rs 93 crore."

Disclosing the financial results for their quarter and for the first nine months of the year, Saumen Chakraborty, the CFO of the company, however referred to a 3 per cent year-on-year growth in topline and a 7 per cent sequential growth. The decline on the profit compared the previous period, he attributed mainly to the price erosion challenges that pharma companies are facing in the US. The share price of the company, which opened at Rs 2569, touched a high of Rs 2594.95 to close at Rs 2504 on Thursday.

 

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