Dr. Reddy’s Laboratories (DRRD IN) – Q2FY27 Result Update – Margin surprise; Sustainability will be key – ACCUMULATE
Published on 25 Oct 2026
Dr. Reddy’s (DRRD) Q2FY27 EBITDA came in higher at INR ~17bn with ~19.1% OPM; above our estimate. The profitability was aided by INR1.5bn licensing/milestone income, lower R&D spend and exclusivity opportunities in US. This may sustain 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 FY28E. Domestic and Russia sales continue to be on strong footing. Our FY27E and FY28E broadly remain unchanged. We have considered base business margins at ~20% in FY28E.
We maintain Accumulate with revised TP of 1350/share (22x Sept 2028E 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 22x P/E on FY28E. Delay in re-launch of Semaglutide are key risks to our call.
