Dr. Reddy’s Laboratories (DRRD IN) – Q1FY27 Result Update – Another quarter of weak base earnings – ACCUMULATE
Published on 23 Jul 2026
Dr. Reddy’s (DRRD) Q1FY27 had inventory write off to the tune of INR 2.4bn related to Semaglutide API. Adjusted for this base business EBITDA was at INR 11bn with ~13% OPM; below our estimate. This should pick up with Semaglutide re-launch across key markets along with moderation of overheads which will be key for margin recovery. Further timely launches like bAbatacept can accelerate profitability from H2FY28E. Domestic and Russia sales continue to be on strong footing. Our FY27E and FY28E stands cut by 14% and 6%. We have considered base business margins from the current level of 13-14% to ~20% in FY28E.
We maintain Accumulate with revised TP of 1300/share (23x FY28E EPS). DRRD have been investing cash flow from gRevlimid to build pipeline across peptides, biosimilars and GLP products; benefits of that should be visible from H2FY27E. At CMP, DRRD is trading at valuations of 21x P/E on FY28E.
