Dr Reddy’s Labs trades lower despite robust Q3 as Credit Suisse flags EBITDA worries

According to Credit Suisse, Suboxone still constitutes about 7 percent of Dr Reddy’s Labs’ base EBITDA, and the entry of Apotex could potentially impact 40 percent of DRL’s EBITDA from Suboxone or 3 percent of consolidated EBITDA.

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Dr Reddy’s Laboratories (DRL) reported a 77 percent surge in net profit for the third quarter of FY23 and a 27 percent growth in consolidated revenue over the last year, but the stock traded lower on February 17.

Global research firm Credit Suisse has an ‘underperform’ rating on the stock, citing concerns over the potential impact of Apotex’s launch of Suboxone on Dr Reddy’s Labs’ earnings before interest, taxes, depreciation, and amortisation (EBITDA).

According to Credit Suisse, Suboxone constitutes about 7 percent of Dr Reddy’s base EBITDA, and the entry of Apotex could potentially impact 40 percent of its EBITDA from Suboxone or 3 percent of consolidated EBITDA.

Dr Reddy’s Laboratories had earlier entered into a settlement agreement with British drugmaker Indivior, resolving patent litigation relating to the latter’s opioid dependence treatment drug Suboxone.

At 11:31am, Dr Reddy’s Laboratories was quoting at Rs 4,512.00, down Rs 6.35, or 0.14 percent, on the BSE. It touched an intraday high of Rs 4,533.00 and an intraday low of Rs 4,464.55.

With agency inputs

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