Dr Reddy’s tanks 6% on dismal Q1; brokerages turn cautious on stock

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26 Aug, 2025 12:21

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Shares of Dr. Reddy’s Laboratories fell nearly 6 percent intraday on Friday as investors turned wary of the company’s dismal June quarter performance.

The drug maker on Thursday said its net profit dropped 57 percent in the quarter ended June on account of falling sales in US and India.

The net profit decreased to Rs 66 crore from Rs 153.5 crore from a year ago. However, revenues rose 3 percent to Rs 3333 crore from Rs 3311.7 crore in the previous year.

Earnings were much below analysts' expectations.

A CNBC-TV18 poll of analysts estimated the net profit to be Rs 272.7 crore and revenues at Rs 3383 crore.

“Our first quarter's results of FY18 have been below expectations,” said GV Prasad, Co-chairman and Chief Executive Officer of Dr Reddy’s.

“While headwinds in the form of price erosion due to US customer consolidation continue, a lower contribution from new product launches in the US and the GST implementation in India also impacted our performance,” Prasad said.

Brokerages largely remained cautious of the stock and highlighted the company’s poor performance in the June quarter. Headwinds in the US hit its financials, while

Brokerage: CLSA | Rating: Downgrade to Sell | Target: Cut to Rs 2,390

CLSA said that the company reported its worst-ever quarter in the recent years. The company, it said, has shown recovery after weak June quarter, but it seems to have reversed. The management, it said, has underlined a strategy to bring things back on track. Further, it said that the results of the management’s strategy would only be visible in FY19. Moreover, the timeline for critical US launches will only be clear by FY18-end.

Brokerage: Deutsche Bank | Rating: Hold | Target: Cut to Rs 2,310

The brokerage observed that US headwinds continued to weigh on the margin outlook. Moreover, muted growth in India offsets strong growth in Europe and emerging markets.

Brokerage: JPMorgan | Rating: Overweight | Target: Cut to Rs 3,300

It said that the revenue and gross profit was in line, but higher operating expenditure impacts EBITDA.

Brokerage: Goldman Sachs | Target: Cut to Rs 2,470

Goldman Sachs cut FY18-20 EBITDA by 7-30 percent to factor in lower margin assumptions. Further, it said that the key risks are remediation delays at Duvvuda/Bachupally and gAloxi litigation.