Prabhudas Lilladher's research report on Dr Reddys Laboratories
Dr. Reddy’s (DRRD) Q4FY25 EBITDA was below our estimate. The base business margins and US sales ex of gRevlimid continued to remain weak. We have scale up base business margins from current level of 16% to +20% in FY27E. Our FY27E EPS stands cut by 4-5%. 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 23x P/E on FY27E and factors in recovery in base business margins.
Outlook
We maintain our ‘Reduce’ rating with TP of Rs1,225/share; valuing at 24x FY27E EPS. Any big ticket ANDA approvals and sharp recovery in base business margins are key risks to our call.
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