Hold Dr Reddy’s Laboratories; target of Rs 1270: ICICI Securities

ICICI Securities research report on Dr Reddy’s Laboratories

Dr. Reddy’s Laboratories’ (DRL) Q2FY25 performance, adjusted for acquisition-related expenses (INR 561mn) and impairment charge of gNuvaring (INR 924mn), was ahead of our expectations. US sales posted growth of 15.6% YoY to USD 445mn, likely driven by gRevlimid (pegged at USD 145mn in Q2) as volumes for base portfolio tumbled. Q2FY25 performance was driven by sales from vaccine portfolio of Sanofi in India and healthy 33.4% growth in RoW markets. Acquisition of NRT business from Haleon, consolidation of Sanofi’s vaccine portfolio coupled with the launch of the Nutraceutical portfolio with Nestle in India and steady new launches across key markets should drive growth in the near term while biologics and GLP-1 products are expected to boost growth from FY26E.

Outlook

The stock has corrected ~8% post Q1FY25 results. We raise our rating to HOLD; TP maintained at INR 1,270, valuing base business at 26x FY26E core EPS of INR 47 and INR 66 in NPV for gRevlimid.