DR.REDDY'S LABORATORIES LTD = QTRLY RESULTS = FOR Q3 FY 2012 = 3rd QTR /E DEC,2011 = Q-EPS 30.6 IN Q3 FY 12 VS Rs.16.1 IN Q3 FY11

Dr. Reddy's Laboratories Limited

NSE Symbol        DRREDDY

Highest ever Quarterly Sales and Profit

Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) announced its unaudited consolidated financial results for the quarter ended December 31, 2011 under International Financial Reporting Standards (IFRS).

Key Highlights

• Launch of olanzapine 20 mg (generic version of Eli Lilly’s Zyprexa® 20 mg) in the US, another key milestone in consistently delivering limited competition opportunities
• Revenues for Q3 FY12 at Rs.27.7 billion ($522 million), YoY growth of 46%

o    Revenues for nine months FY12 at Rs.70.2 billion ($1.3 billion), YoY growth of 29%.

• EBITDA for Q3 FY12 at Rs.9.2 billion ($174 million), 33% to sales, YoY growth of 127%
• EBITDA for nine months FY12 at Rs.18.6 billion ($351 million), 27% to sales, YoY growth of 59%.
• Adjusted* PAT for Q3 FY12 at Rs.5.2 billion ($98 million), YoY growth of 91%
• Adjusted* PAT for nine months FY12 at Rs.11.1 billion ($209 million), YoY growth of 44%.

• Q3 FY12 - 33 new generic launches, 16 new generic filings and 7 DMF filings

*Note: Adjustments on account of interest on bonus debentures (net of tax)

 All figures in millions, except EPS
All dollar figures based on convenience translation rate of 1USD = ₹ 53.01

Dr. Reddy's Laboratories Limited and Subsidiaries

Particulars	Q3 FY12			Q3 FY11			Growth %
	($)	(Rs)	%	($)	(Rs)	(%)
Revenue	522	27,692	100	358	18,985	100	46
Cost of revenues	210	11,117	40	162	8,571	45	30
Gross profit	313	16,575	60	196	10,414	55	59
Operating Expenses
Selling, general & administrative expenses	145	7,679	28	120	6,374	34	20
Research and development expenses	29	1,514	5	25	1,306	7	16
Other operating (income) / expense	(3)	(165)	(1)	(4)	(199)	(1)	(17)
Results from operating activities	142	7,547	27	55	2,933	15	157
Net finance (income) / expense	(3)	(174)	(1)	1	48	0	-
Share of (profit) / loss of equity accounted investees	(0)	(26)	(0)	0	1	0	-
Profit / (loss) before income tax	146	7,747	28	54	2,884	15	169
Income tax (benefit) / expense	49	2,616	9	3	152	1	-
Profit / (loss) for the period	97	5,131	19	52	2,732	14	88

Unaudited Consolidated Income Statement

Diluted EPS

0.6

30.2

0.3

16.1

88

Income Statement Highlights

• Gross profit margin 60% to revenues in Q3 FY12, increased largely on account of a favorable mix of high margin olanzapine revenues and benefit of rupee depreciation.
• Selling, General & Administration (SG&A) expenses including amortization at Rs.7.7 billion ($145 million) increased by 20% over Q3 FY11. This increase is on account of higher manpower and freight costs and the effect of rupee depreciation against multiple currencies.
• Net Finance income at Rs.174 million ($3 million) in Q3 FY12 versus net Finance cost of Rs.49 million ($1 million) in Q3 FY11. The change is on account of.  
• Net forex gain of Rs.285 million ($5 million) in Q3 FY12 versus net forex loss of Rs.45 million ($1 million) in Q3 FY11.
• Net interest expense of Rs.155 million ($3 million) in Q3 FY12 versus Rs.98 million ($2 million) in Q3 FY11.
• Profit on sale of investments of Rs.44 million ($1 million) in Q3 FY12 versus Rs.4 million in Q3 FY11.

• EBITDA of Rs.9.2 billion ($174 million) in Q3 FY12, represents 33% of revenues and recorded a year-on-year growth of 127%. EBITDA of Rs.18.6 billion ($351 million) for nine months ended December 2011, represents 27% of revenues and recorded a year-on-year growth of 59%.
• Profit after Tax adjusted for interest on bonus debentures (net of tax), was at Rs.5.2 billion ($98 million) in Q3 FY12, 19% of revenues and year-on-year growth of 91%. Adjusted PAT for nine months ended December 2011 was Rs.11.1 billion ($209 million) and recorded year-on-year growth of 44%.
• Adjusted EPS for Q3 FY12 was Rs.30.6 ($0.6) versus Rs.16.1 ($0.3) in Q3 FY11. Adjusted EPS for nine months ended December 2011 was Rs.65.1 ($1.2).
• Capital expenditure for nine months ended December 2011, was Rs.5.0 billion ($94 million).

Consolidated Income Statement:

Nine months ending December 2011

All figures in millions, except EPS
All US dollar figures based on convenience translation rate of 1USD = ₹ 53.01

Particulars	9 Months FY12				9 Months FY11			Growth %
	($)	(Rs)	%		($)	(Rs)	(%)
Revenue	1,323	70,153		100	1,028	54,520	100	29
Cost of revenues	581	30,818		44	475	25,206	46	22
Gross profit	742	39,335		56	553	29,314	54	34
Operating Expenses
Selling, general & administrative expenses	409	21,651		31	331	17,562	32	23
Research and development expenses	79	4,170		6	67	3,569	7	17
Other operating (income) / expense	(11)	(567)		(1)	(11)	(602)	(1)	(6)
Results from operating activities	266	14,081		20	166	8,786	16	60
Net finance (income) / expense	(1)	(78)		(0)	5	262	0	-
Share of (profit) / loss of equity accounted investees	(1)	(43)		(0)	(0)	(7)	(0)	514
Profit / (loss) before income tax	268	14,202		20	161	8,531	16	66
Income tax (benefit) / expense	63	3,366		5	16	836	2	303
Profit / (loss) for the period	204	10,836		15	145	7,695	14	41

Diluted EPS		1.2	63.7		0.9	45.3		41

COMMENTS :- The improvement in profitability on a consolidated basis is EXCELLENT.

Diluted EPS for the  9M FY 12 is Rs.63.7 against Rs.45.3 ( a growth of 41%). Likewise  Adjusted EPS for Q3 FY12 was Rs.30.6 ($0.6) versus Rs.16.1 ($0.3) in Q3 FY11. If it repeats similar performance (as of Q3) in Q4 also, the annual EPS will be around Rs.94.

Current MP is Rs.1659; while the  52 week high price is Rs.1717.65 and the  52 week low price is Rs.1386.10. On this Basis, the PE Ratio will be around 17.65.

Dr.Reddy’s has been a pioneer in  R&D efforts – having introduced many new drug formulations in US and other markets and becoming the dominant player in them in those markets.  On that basis – it is always a good buy for medium / long term investors.

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