Dr. Reddy’s Laboratories (DRRD IN) – Q2FY26 Result Update – Lack visibility to compensate gRevlimid erosion – REDUCE
Published on 26 Oct 2025
Dr. Reddy’s (DRRD) Q2FY26 EBITDA was largely in line with our estimates. The base business margins and US sales ex of gRevlimid continued to remain weak. We have scale up base business margins from the current level of 15-16% to ~21% in FY27E. Our FY27 and FY28E EPS broadly remain unchanged. DRRD have been investing cash flow from gRevlimid to build pipeline across peptides, biosimilars and GLP products; benefits of that may take some time. Further thin US pipeline in near term and competition in certain key products remains a key risk. At CMP, DRRD is trading at valuations of 24x P/E on FY27E and factors in recovery in base business margins. We maintain our ‘Reduce’ rating with TP of Rs1,270/share; valuing at 24x FY27E EPS. Any big ticket ANDA approvals and sharp scale up in Semaglutide opportunity are key risks to our call.
