Dr Reddy’s announces financial results for Q2 and H1 FY23

Dr Reddy’s has announced its consolidated financial results for the quarter and the half year ending 30th September, 2022. The highlights of the results are as follows, according to a statement released by the company last week.

• The revenue from GG segment stood at Rs 55.9 billion. There was a Year on Year (YoY) growth of 18 per cent and sequential quarter growth of 26 per cent driven by launch of the Lenalidomide capsules in the US market (as part of the volume limited settlement with innovator) and sequential quarter improvement in Russia sales. However, the growth was partly offset by price erosion in the company’s generic markets and higher base due to COVID product sales in previous year.
• The revenue from North America stood at Rs 28 billion. The YoY growth stood at 48 per cent and sequential quarter growth of 57 per cent, driven by launch and scale up of new products and favourable movement of forex rates, which was partly offset by price erosion in some of the company’s key molecules.
• Revenue from Europe stood at Rs 4.2 billion, with YoY growth of two per cent and sequential quarter growth of one per cent.
• Revenue from India stood at Rs 11.5 billion with YoY growth of one per cent impacted due to higher base of Q1 FY22, which included contribution from COVID product sales. India’s sequential quarter declined by 14 per cent primarily on account of high base impact, as the company had recognised divestment income of a few non-core brands in Q1 FY23.
• Revenue from emerging markets stood at Rs 12.2 billion with a YoY decline of six per cent and sequential quarter growth of 36 per cent.
• Revenue for Russia stood at Rs 5.9 billion. The YoY growth of four per cent was on account of new product launches, increase in sales prices and favourable movement of forex rates, partly offset by reduction in base volumes. Sequential quarter growth of 85 per cent was primarily due to lower sales base of Q1 FY23, which was impacted due to channel inventory normalisation.
• Revenue from other CIS countries and Romania stood at Rs 2.2 billion with YoY decline of one per cent due to reduction in base volumes and adverse movement of forex rates, partly offset by increase in sales prices and new product launches. Sequential quarter growth of 13 per cent was driven by increase in base volumes and new product launches, partly offset by adverse movement of forex rates.
• Revenues from Rest of World (RoW) markets stood at Rs 4.1 billion. The YoY decline of 18 per cent was on account of reduction in the COVID product sales in current quarter vs. last year, decrease in sales prices, which was partly offset by new product launches. Sequential growth of six per cent was driven by new product launches, partly offset by a reduction in base volumes and sales price of some of our products.
• Revenue from Pharmaceutical Services and Active Ingredients (PSAI) stood at Rs 6.4 billion with a YoY decline of 23 per cent and sequential decline of nine per cent. The YoY decline was primarily on account of lower volumes due to higher base in Q2 FY22 which had COVID product sales, partly offset by new product sales and favourable forex rates. Sequential decline was majorly due to lower traction in the volumes for some of the products, partly offset by new product sales.

Further, according to the statement, the income statement highlights of the company are as follows:

• Gross profit margin for the quarter stood at 59.1 per cent. It increased by aproximately 565 bps over previous year and approximately 920 bps sequentially, majorly driven due to product mix (including new products), accruals related to the Production Linked Incentive (PLI) scheme, which was partly offset by price erosion and provision made on inventory for COVID products. The  gross profit margin for GG and PSAI business segments are at 65.4 per cent and 3.6 per cent, respectively. Gross profit margin of PSAI have been impacted due to COVID inventory provision and adverse impact of manufacturing overheads which are at similar levels over lower sales base.
• Selling, General and Administrative (SG&A) expenses stood at Rs 16.6 billion, increased by four per cent on a YoY basis and by seven per cent, sequentially, in line with the business growth.
• Research and Development (R&D) expenses stood at Rs 4.9 billion.
• Other operating income stood at Rs 0.3 billion compared to Rs 1.7 billion in Q2 FY22. Q2 FY22 was higher on account of recognition of income towards sale of rights relating to anti-cancer agent E7777 (denileukin diftitox).
• Net finance expense stood at Rs 156 million compared to net finance income of Rs 319 million in Q2 FY22.
• Profit before tax stood at Rs 16.1 billion, increased by 27 per cent YoY and by 10 per cent, sequentially.
• Profit after tax stood at Rs 11.1 billion and the effective tax rate is 30.9 per cent for the quarter.
• Diluted earnings per share is at Rs 66.89.

In addition, the statement also mentioned other highlights of the quarter. These are as below:

• EBITDA is at Rs 19.3 billion and the EBITDA margin is 30.6 per cent.
• Capital expenditure is at Rs 2.5 billion.
• Free cash flow is at Rs 5.8 billion.
• Net cash surplus for the company is at Rs 13.7 billion as on 30th September, 2022. Consequently, net debt to equity ratio is (0.07).