IDBI Capital: 'Buy' Dr. Reddy's Labs

IDBI Capital, in Q1FY07 results update, has recommended a "Buy" rating on Dr. Reddy's Laboratories.

According to a report released on July 28, the brokerage said: "Q1FY07 revenues was substantially higher than our expectations, revenues up by whooping 151% YoY to Rs.14bn ($306 m). Gross profit margins were below our expectations, at 43% vs 52% in the corresponding previous period. But, strong volume growth and lower R&D expenditure lead a sharp 303% YoY spurt in PAT to Rs.1.4bn ($30 m), compared to our expectation of Rs.1.1bn.

"We have upgraded our FY07E earning estimates by 10%, the current price discounts our FY07E EPS of Rs.60.5 by 22x. We recommend investment at current levels 'Buy'.

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