Dr. Reddy’s Laboratory (NYSE: RDY) on 20th May 2020 announced the result for the fourth quarter of 2020 and the financial year 2020. Coronavirus has actually provided an opportunity for the company to increase its profit. Net profit in Q4 2020 has increased by 76% compared to the same period year ago.
- Revenue: Total revenue generated by the company in Q4 2020 was Rs.44,318 million (US$588 million) up by 10% from Rs.40,166 million (US$533 million) in Q4 2019. In FY2020, total revenue generated by the company was Rs.1,74,600 (US$2,316 million) up by 13% from Rs.1,53,851 million (US$2,041 million) earned in FY 2019.
- Gross Profit: Gross profit earned in Q4 2020 was Rs. 22,808 million (US$303 million) increased by 8% from Rs. 21,053 million (US$279 million) earned in Q4 2019. In FY2020, gross profit earned was Rs. 94,009 million (US$1,247 million), increased by 13% from Rs.83,430 million (US$1,107 million) earned in FY2019.
- Gross Margin: Gross margin for Q4 2020 and Q4 2019 was 51.5% and 52.4% respectively. Gross margin for FY2020 and FY2019 was 53.8% and 54.2% respectively.
- Selling, general, and administrative expenses: Company’s selling, general and administrative in Q4 2020 has increased by 1% to Rs.12,177 million (US$162 million) from Rs.12,294 million (US$ 163 million) spend in Q4 2019. For FY2020, total selling, general and administrative expense was Rs.50,129 million (US$ 665 million) up by 3% from Rs.48,680 million (US$646 million) in FY2019.
- Research and Development Expense: The amount spent on research and development in Q4 2020 was Rs.4,190 million ($56 million) increased by 14% from Rs.3662 million (US$49 million) spend in Q4 2019. Company has spent Rs.15,410 million (US$ 204 million) in FY2020 for research and development declined by 1% from Rs.15,607 million (US$207 million) spend in FY2019.
- EBITDA: Reddy’s EBITDA for the fourth quarter was Rs.10,013 million (US$ 133 million) increased by 14% from Rs.8,819 million (US$ 117 million) in fourth quarter of 2019. In FY2020, EBITDA of Dr. Reddy was Rs.46,431 million (US$ 616 million) increased by 36% from Rs.34,189 million (US$ 453 million) in FY2019.
- Cash and cash equivalent and other investment: Cash and cash equivalent and other investment at the end of FY2020 was Rs.26,068 million (US$ 346 million) compared to Rs.25,570 million (US$ 339) million at the end of FY2019.
- Diluted EPS: Diluted EPS for Q4 2020 was Rs.46.01 (US$0.61) compared to Rs.26.16 (US$0.35) in Q4 2019. In FY2020, diluted EPS was Rs.117.40 (US$ 1.56) compared to Rs.113.09 (US$ 1.5) in FY2019.
- Net Profit: Reddy’s net profit for the fourth quarter of 2020 was Rs.7,642 million (US$101 million) increased by 76% from Rs.4,344 million (US$58 million) in the fourth quarter of 2019. In FY2020 net profit earned by the company was Rs.19,498 million (US$ 259 million) increased by 4% from Rs.18,795 million (US$ 249 million) in FY2019.
- All US dollar amounts based on a convenience translation rate of US$1 = Rs. 75.39.
Various initiatives have been taken by the company to run the operation smoothly during COVID-19. The company is using the digital channels as far as possible to allow employees to work from home and reach out to customers, doctors, and venders. Drugmaker is taking care of health and safely its employees who are required to work in the plant by providing them protective gears, encouraging social distancing and other measures. During the CSR initiative, Dr. Reddy has provided PPE kits, masks, sanitizers, gloves, and food assistance to marginal sections, migrant families, and health care professionals.
Dr. Reddy has a total of three segments. The global generics segment contributes major revenue to the business. Revenue generated by global generics in Q4 2020 was 82% of the total revenue generated by the company. In Q4 2020 revenue generated by this segment was Rs.36,398 million increased by 20% from Rs.30,384 million earned in Q4 2019. For FY2020, this segment was able generate revenue of Rs.1,38,123 million (US$ 1,832 million) up by 12% from Rs.1,22,903 million (US$ 1,630 million).
Pharmaceutical Services and Active Ingredients segment contributed 18% of total revenue in Q4 2020. Revenue generated by this segment was Rs.7,195 million in Q4 2020 increased by 6% from Rs. 6,765 million generated in Q4 2019. In FY2020, revenue earned from this segment was Rs. 25,747 million (US$342 million) up 7% from Rs.24,140 million (US$320) in FY2019.
The proprietary product segment contributes a small percentage of revenue to the business and has witnessed negative growth in this quarter. In Q4 2020, this segment contributed 2% of total revenue to the business. Revenue generated by this segment in the fourth quarter of 2020 was Rs. 725 million, declined by 76% from Rs. 3,017 million in the same period year ago. In FY2020, this segment saw good growth, it was able to generate revenue of Rs.10,730 million (US$142 million) up by 58% from Rs.6,808 million (US$90 million) earned in FY2019.
In North America, the company saw a fair growth. Revenue generated by the company in Q4 2020 was Rs.18,072 million up by 21% from Rs.14,957 million in Q4 2020. In FY2020 revenue generated was Rs.64,659 million up by 8% from Rs.59,957 in FY2019. Price erosion and favorable forex rate has helped the company to increase its revenue in North America. During this quarter, the company launched 5 new products – major ones being Naproxen and Esomeprazole Magnesium delayed-release tablets (gVimovo), Pyrimethamine Tablets (gDaraprim) and Naloxone HCL Injection (with CGT exclusivity).
In the Domestic market India, growth of revenue is not impressive. Revenue earned in Q4 2020 was Rs. 6,839 million increased by 5% from Rs 6,505 million in Q4 2019. For FY2020, revenue earned was Rs.28,946 million increased by 11% from Rs.26,179 million in FY2019. Company claims that revenue has been affected due to logistics disruption caused by COVID-19.
In emerging markets, revenue earned in the fourth quarter of 2020 was Rs.8,042 million increased by 15% from Rs.7,010 million earned fourth quarter of 2019. In FY 2020, revenue from emerging market was Rs.32,811 million up by 14% from Rs.28,984 million. In the emerging market, Russia contributed the highest revenue of Rs.16.9 billion and year on year growth of 10%.
In Europe, the company witnessed strong revenue growth. In Q4 2020, revenue earned was Rs. 3,446 million increased by 80% from Rs. 1,912 million earned in Q4 2019. In FY2020 revenue earned was Rs.11,707 million up by 49% from Rs.7,873 million in FY2019. Revenue in Europe was increased due to the launch of new products and expansion of business in countries France, Italy, and Spain.
On 12th February 2020, Dr. Reddy announced that it is acquiring the branded generics division of Wockhardt Limited. In India and other countries Nepal, Maldives, Bhutan, and Sri Lanka at Rs.185 million. Under this deal, 62 brands in multiple therapy areas Neurology, VMS Radiology, Gastroenterology, Dermatology, vaccine along with sales and marketing team will transfer to Dr. Reddy. The company will also get manufacturing plants of Wockhardt located in Baddi, India along with all the employees.
COVID-19 has provided a bright spot to India pharma companies. Dr. Reddy is working with other companies to develop products related to COVID-19, The company is also supplying hydroxychloroquine and paracetamol all-round the world, which are you used for the treatment of coronavirus patient. Analyzing the result of Q42020 and an increase in coronavirus cases from April, it is possible that Dr. Reddy may report strong growth in the next quarter.