>Dr. Reddy’s Laboratories (IDFC SSKI)

DRL continues to be comfortable on Russia; CIS markets seeing pressure: With a sharp depreciation in the Russian currency ruble and other CIS currencies, the street has been concerned on DRL’s exposure to these markets. To put it in context, Russia and CIS are DRL’s most profitable geographies and accounted for 11% of DRL’s sales for 9MFY09 (excluding one-off Imitrex sales). We estimate that these geographies contribute much higher ~16% (for FY09E) share to the overall gross profit, which underlines their importance. DRL has taken a Rs300m hit due to the MTM impact on its outstanding receivables from the region.

Betapharm – AOK tender implementation likely; expect another impairment charge in Q4FY09: DRL believes that AOK tender is most likely to get implemented in the current round even though there may be a delay of 2-3 months. (AOK is the largest insurer in Germany with ~65% of population under coverage. AOK’s tender has been scuttled twice before due to legal hurdles.) AOK has already won favorable verdicts in a few litigations initiated by some players against the tender process. Given this backdrop as well as its feedback from the AOK officials, DRL expects that AOK will win the remaining cases too and will be able to enforce the tenders. The implementation is likely from May-June 2009.

To see full report: DR. REDDY LABORATORIES