Dr Reddy's Laboratories
Cyclical: bought at the gRevlimid cliff
- Last close
- ₹1,251.90
- 29 Sept 2026 · reference
- 1D · 1M
- +2.5% · +6.3%
- price-only
- Weight
- 0.7%
- 31 Jul 2026 · Aug rank —
- Thesis review
- 8 Sep 2026
- Why We Own, p45
Approved description
Dr. Reddy's is a top-3 Indian pharma company (FY26 revenue Rs 33,700 cr) with generics in North America (USD 236 mn in Q1FY27, 27% of sales), Europe incl. the Haleon NRT (nicotine replacement) business, India (Rs 1,718 cr, +17%), Emerging Markets led by Russia (Rs 903 cr, ~49% of EM), PSAI (APIs) and a biosimilars pipeline (abatacept BLA pending). It was first-to-market with generic semaglutide in Canada (Jan-2026) and launched oral semaglutide in India, but is in a FY27 earnings trough as gRevlimid (lenalidomide) profits roll off.
- 01Trough-earnings cyclical: FY26 PAT fell to Rs 4,158 cr from Rs 5,725 cr and Q1FY27 EBITDA margin hit 12.5%; management targets ~20% EBITDA margin 'in coming quarters' and higher once semaglutide resumes.
- 02Semaglutide relaunch: commercial supply targeted Nov-2026 with 6-7 mn pens to be supplied Nov-Mar across Canada, India and partner markets (management-assessed 80-90% probability); first-to-market position in Canada.
- 03Ex-US engines growing double digits: India Rs 1,718 cr (+17%), Emerging Markets Rs 1,833 cr (+31%) with Russia +12% and Europe/NRT Rs 1,444 cr (+13%).
- 04Balance sheet: net cash Rs 3,058 cr, capex trimmed to Rs 1,800 cr, dividend yield 0.7%; DIIs now 31.8% holders.
- 05Pipeline optionality: abatacept biosimilar approval targeted Dec-2026; six NA launches in Q1 incl. bosutinib 400 mg with 180-day exclusivity.
Reference close, with results-period markers
- 1Q Sep-25 end · 30 Sept 2025
- 2Q Dec-25 end · 31 Dec 2025
- 3Q Mar-26 end · 31 Mar 2026
- 4Q Jun-26 end · 30 Jun 2026
Quality score, technicals and Buoyant Score
Computing the scorecard…
Latest quarter · Q Jun-26
| Line (₹ cr) | Q Jun-26 | YoY | QoQ |
|---|---|---|---|
| Net Sales | 8,100 | −5.5% | +7.3% |
| Operating Profit | 860 | −60.4% | +124.5% |
| Net Profit | 444 | −68.7% | +100.9% |
Reported vs internal estimate: internal quarterly estimates are not in the supplied package; consensus feed not licensed. YoY/QoQ per PRD §12.5 (transitions, not %, on non-positive bases).
Position and valuation context
General industrial/consumer/IT preset: growth, margins, ROCE/ROIC, working capital, FCF, net debt; P/E, EV/EBITDA.
Sell-side targets are third-party views, not Buoyant's; the upside is recomputed on our reference close, so it differs from the figure printed at the broker's price date.
Valuation range
No headline target on this page; the book quotes the thesis and the risk rather than a target.
What we watch
- Semaglutide API re-test in Sep-2026 and commercial supply resumption targeted Nov-2026 (6-7 mn pens by Mar-2027).
- Abatacept biosimilar US approval decision expected by Dec-2026 (Q4FY27).
- Q2FY27 results (late Oct/Nov-2026): evidence of EBITDA margin recovering toward 20%.
- Semaglutide API quality failure: Rs 240 cr provision already; a second failure or slower re-test (Sep-2026) would push the Nov-2026 relaunch and FY27 EPS cuts already flagged by Emkay (-5%).
- USFDA: 7-observation Form 483 at the Bachupally biologics plant (Jun-2026) could delay abatacept approval (Dec-2026 target).
- Consensus still expects downgrades: Axis SELL (TP 1,070), Goldman SELL (1,050); US base ex-Revlimid has settled near bear-case levels per Emkay.