Dr Reddy’s Q2 preview: Pharma major likely to report sharp drop in net profit on weak US biz

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26 Aug, 2025 12:21

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Pharmaceutical major Dr Reddy’s Laboratories Limited is expected to report weak earnings for the quarter ended September 30 on October 28 due to weakness in its North American operations and slower growth in India.

The drugmaker is likely to report a 19.4 percent year-on-year decline in consolidated net profit to Rs 799.8 crore for the July-September quarter, according to an average of estimates from six brokerages polled by Moneycontrol.

The weakness in the bottomline will trickle down from a muted topline performance and higher costs during the quarter. Dr Reddy’s consolidated net sales are likely to fall 1.8 percent on-year to Rs 5,659.3 crore, according to the Moneycontrol poll.

The Hyderabad-based firm's North American operations will set the tone for the September quarter performance as likely price erosion will trigger a decline in sales on a year-on-year basis. On a sequential basis, however, the market may see a 14 percent growth to $262 million due to the launch of the generic Revlimid.

Indian operations are also expected to report a slowdown in revenue growth because of a high base in the year-ago quarter, which was boosted by the sales of COVID-19 treatment-related drugs.

Analysts expect the domestic formulations business to report a 4-5 percent year-on-year growth in sales, which will bring down the overall growth run rate for the consolidated entity.

On the operating front, an increase in expenses during the quarter due to return to office, costs related to the sales force and price erosion in the high -margin US market are likely to result in a year-on-year decline.

Dr Reddy’s consolidated operating profit is expected to fall 11.3 percent YoY to Rs 1,184.6 crore in the reporting quarter.

The drugmaker’s consolidated operating margin is also expected to shrink 153 basis points (bps) YoY to 21.65 percent. Sequentially, margins are likely to expand 393 basis points due to the launch of new products in the lucrative US market.

One basis point is one-hundredth of a percentage point.

On October 27, shares of Dr Reddy’s ended 1.1 percent higher at Rs 4,491.2 on the National Stock Exchange.

(Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.)