Buy Dr. Reddy’s Laboratories; target of Rs 6373 Sharekhan

Sharekhan's research report on Dr. Reddy’s Laboratories

Dr Reddy’s Laboratories has entered into an agreement for the development and commercialisation of COYA 302, an investigational combination therapy for the treatment of Amyotrophic Lateral Sclerosis (ALS). Dr. Reddy’s will make a USD 7.5 million upfront payment to Coya. Coya is also eligible to receive sales-based milestone payments of up to USD 677.25 million linked to tiers of cumulative net sales achieved over several years (over the term of the agreement subject to product commercial exclusivity). Under the Agreement, Dr. Reddy’s will obtain commercialization rights for COYA 302 in the United States, Canada, the European Union and the United Kingdom for patients with ALS.

Outlook

Management retains its strong guidance of over 25% EBITDA margin in the near term, driven by settled product agreements like gRevlimid and double-digit growth in the India business. The stock trades at an attractive valuation of 17.3x and 15.4x its FY2025E and FY2026E estimates vs. peers’ 26x and 22.1x, indicating attractive valuations. Hence we maintain BUY with PT of Rs. 6,373.

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