Mumbai: Shares of Dr Reddys Laboratories recovered sharply after falling as much as 30 per cent in intra-day trade and ended Friday 4 per cent lower, likely pointing to easing concerns over an import alert after a US regulatory report on a key plant of the drugmaker.The stock ended the day at Rs 2,563.35 apiece after plunging in early trade.
A Jefferies research note said that the US drug regulator had reiterated some concerns regarding Dr Reddys Bachupally unit.
The Bachupally observations include four repeat points, including one repeated from 2015 and 2017, said Jefferies.The observations are around the lack of thorough investigations, written records lacking details, employees not being trained and lack of infrastructure, the note said.
Bachupally is a key plant for the drugmaker.We dont think that it is serious enough to warrant an import alert, said Surajit Pal, analyst at Prabhudas Lilladher.Jefferies said that Dr Reddys should see a strong earnings recovery in FY20, led by the launch of generic suboxone.But the stock is trading at 20 times FY20 estimated earnings, implying full multiples to the limited time earnings, it said.Product concentration for DRRD is high with 30 per cent of FY21E EPS contributed by three products, where risks of competition and approval delays are high.
Although DRRD is ahead of peers in the complex generic investment, execution India, US compliance has been below par, said Jefferies, retaining the underperform rating, with a target price of Rs 2,180.