Dr Reddy’s Q2FY26 preview: India, Europe to lift topline; US drag persists

Dr. Reddy’s Laboratories

Dr Reddy’s Laboratories will announce its Q2 FY26 results on October 25. Analysts expect a steady quarter led by India and Europe, while the US business continues to face headwinds from gRevlimid tapering and base portfolio erosion. Margins are expected to stay near the 25 percent mark, supported by mix improvement and currency tailwinds, even as pricing pressure weighs on profitability.

A Moneycontrol poll of four brokerages pegs revenue growth at 8 to 9 percent year-on-year to around Rs 8,650 to 8,750 crore, and net profit near Rs 1,450 crore, up 15 to 16 percent YoY. EBITDA is seen at Rs 2,150 to 2,200 crore, with margins of 24.5 to 25.8 percent, broadly stable sequentially.

Key factors driving Q2 earnings
Dr Reddy’s performance this quarter is expected to be regionally mixed. The India business is likely to post 8 percent YoY growth, aided by the continued integration of the Sanofi-acquired vaccine portfolio and a one-off GST-related boost in September, according to HDFC Securities.

In Europe, the company is expected to sustain strong double-digit growth, led by the nicotine replacement therapy (NRT) portfolio. The NRT franchise is estimated to have contributed around Rs 6.7 to 6.8 billion this quarter, helping offset weakness in other regions.

The US market remains the key drag, with analysts expecting a 6 to 10 percent sequential decline due to lower gRevlimid sales and pricing erosion in the base business. HDFC Securities estimates US revenue at roughly USD 380 to 390 million, with gRevlimid sales moderating to around USD 100 million.

While JM Financial anticipates muted earnings led by a 15 percent YoY drop in the US and pressure from Russia, Nirmal Bang and BOBCAPS expect steady performance supported by India and Europe. HDFC Securities forecasts revenue of Rs 8,673 crore, EBITDA of Rs 2,238 crore (25.8% margin), and net profit of Rs 1,469 crore, implying 6 percent YoY growth. It expects gross margin softness from US price erosion, partially offset by stable operating costs.

What to watch out for
Investors will track management commentary on the US generics recovery path, the durability of NRT-led growth in Europe, and updates on the Sanofi vaccine portfolio integration. Attention will also be on upcoming complex generic launches such as gIxempra, pipeline progress in specialty drugs, and R&D spend trends.

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