Dr. Reddy’s Earnings: Solid Utilization Trend Fuels Top-Line Growth; Shares Fairly Valued

No-moat Dr. Reddy’s reported mixed second-quarter earnings. Total revenue was up 16.5%, higher than our expectation of low-teens growth, as solid performance across regions drove sales. But operating margins slipped from higher research and development spending as well as impairment charges related to Haloette (generic Nuvaring). After updating our model, baking in time value of money impacts, and accounting for a 5:1 stock split that was exercised on Nov. 5, we inch up our fair value estimate to $14 ($70 presplit) per share from $13.60 ($68 presplit). We see shares as fairly valued.