Prabhudas Lilladher's research report on Dr Reddys Laboratories
Dr. Reddy’s (DRRD) Q1FY26 EBITDA adjusted for licensing income was in line with our estimate. The base business margins and US sales ex of gRevlimid continued to remain weak. We have scale up base business margins from the current level of 15-16% to +21-22% in FY27E. Our FY26 and FY27E EPS broadly remain unchanged. DRRD have been investing cash flow from gRevlimid to build pipeline across peptides, biosimilars and GLP products; benefits of that may take some time. Further thin US pipeline in near term and competition in certain key products remains a key risk. At CMP, DRRD is trading at valuations of 24x P/E on FY27E and factors in recovery in base business margins.
Outlook
We maintain our ‘Reduce’ rating with TP of Rs1,270/share; valuing at 24x FY27E EPS. Any big ticket ANDA approvals and sharp scale up in Semaglutide opportunity are key risks to our call.
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