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DDRD delivered earnings well ahead of our estimates largely driven by new launches in the US, India and EMs particularly Russia. We believe the base business along with new launches has grown the US sales to USD 375mn. We believe gRevlimid contribution of USD 125- 130mn allows us to see the global generics gross margin soaring to c.60%. As indicated earlier, PSAI segment outperformed expectations with 18% gross margins (vs.4% QoQ) and is expected to grow hereon. Cidmus has been scaling up well and has exceeded management’s expectations. DRRD will grow its US business in single digits on an inflated gRevlimid base which should continue generating robust cash (3Q FCFF was INR 20bn). We believe the surplus cash will be prudently reinvested for acquisitions in India/ ROW markets thereby reducing their dependence on US generic business, enhancing their capex and increasing R&D spends for Horizon 2 avenues. At CMP of INR 4201, DRRD trades at 20x/18x FY24/25 earnings ex-Revlimid. We maintain BUY on DRRD valuing it at 25x Sep’24 earnings to derive a Price target of INR 5890 (including gRevlimid NPV of INR 275)

* Revlimid-led US drives beat: US business reported sales of INR 30.6bn (USD 375mn; 15% beat) growing 64%YoY and 9%QoQ. The performance was driven by gRevlimid which contributed USD 125-130mn driving overall EBITDA margins to 30%+. DRRD launched 5 products and plans to launch 30 products in FY24. Management has guided for single digit growth in US business on an inflated gRevlimid base. DRRD has an attractive US pipeline including 78 pending filings (41 Para IV, 21 FTFs) and is focusing on biosimilars. DRRD recently completed Phase III clinical trials for Rituximab and is filing in USA, Europe and other highly regulated markets. The company has partnered with Fresenius Kabi for commercialisation in USA and intends to commercialise the product in Europe and other geographies directly. DRRD also completed Phase 1 for Tocilizumab. Fresensius has also received US FDA approval for Pegfilgrastim.

* EM, India continues to grow: EM reported revenues of INR 13.1bn growing 14%YoY. Russia and CIS reported revenues of INR 9.1bn (15% beat), growth was primarily driven by Russia which posted solid growth of 45%YoY on account of increase in biosimilars, higher volumes due to seasonality and favourable forex rate. This quarter coincided with the government purchase contract for biosimilars in Russia. Domestic business reported INR 11.3bn revenues (3% miss) growing +10%YoY. Management guides for 10% overall growth for the domestic business. DRRD continues to focus on growing India business by growing brands organically and evaluating inorganic opportunities. The Cidmus acquisition is tracking well and management expects profitability with better cost structure in future. In China, DRRD has 20 products pending approval and will file 40-50 products over the next 3-4 years. Approval in China typically takes 18-24 months and this business will grow in high double digits.

* PSAI recovers: PSAI gross margins came in at 18% (vs. 23% YoY; 4% QoQ) in line with management guidance. PSAI revenues improved 7%YoY and 21% QoQ (7% beat) to INR 7.8bn The management expects to grow with margins gradually inching up hereon as this

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