Fundamentals

DR REDDY’S LABORATORIES 

Ticker : 500124 
BUY: Rs 2602 
Target: Rs 2860

Dr Reddy's Lab (DRL) is one of India’s leading players in pharma and generics business, having a firm rooting in the US and other export markets. In Q2FY19, the company’s revenue was up by 7.2 percent YoY with 26.8 percent YoY growth from Russia and other CIS and 63.7 percent YoY growth from RoW sales. EBITDA grew by 13.4 percent YoY and EBITDA margin stood at 19.9 percent. PAT for the quarter jumped by 71.2 percent YoY to Rs 507 crore from Rs 296 crore. During H2FY19, the management plans to launch 10-15 new products. Recently, the US Court of Appeals lifted temporary ban on its generic Suboxone film, which will help it generate USD 60 million in FY19. The R&D spend in FY19 is expected to be 12-13 percent of sales. Considering these factors, we recommend it as a BUY.



CONTAINER CORPORATION

Ticker : 531344 
BUY: Rs 671.20 
Target: Rs 754 

Container Corporation is engaged in transportation of containers through rail and road and handling of containers. In Q2FY19, company’s revenue increased by 26.1 percent YoY with domestic revenue up by 23 percent YoY and export-import revenue up by 20 percent YoY. EBITDA grew by 29.9 percent YoY and the EBITDA margin stood at 22.2 percent, up by 64 bps. PAT for the quarter jumped by 46.8 percent YoY from Rs 228.9 crore to Rs 336.1 crore. It has a dominant share in container rail transport (74 percent) as railways are preferred over roads due to high fuel prices. For FY19, the company plans to increase the double stacked train by 50 percent with volume and revenue growth of 12 percent. By FY20, it plans to achieve target of 100 terminals as against 82 at present. Thus, we recommend it as a BUY.