During Thursday’s trading session, the shares of a global pharmaceutical company providing access to affordable and innovative medicines tumbled by nearly 2 percent on BSE, after CITI Research trimmed target price and recommended a “sell” rating on the stock, with a downside of about 25 percent.
With a market capitalisation of Rs. 1.09 lakh crores, at 11:26 a.m., the shares of Dr Reddy’s Laboratories Limited were trading in the red at Rs. 1.317.6 on BSE, down by 1.7 percent, as compared to its previous closing price of Rs. 1,340.85. The stock has delivered positive returns of nearly 9 percent in the last one year, and has gained by over 6 percent in a month.
Brokerage Target & Outlook
Global brokerage firm CITI Research has initiated a “sell” rating on Dr Reddy’s Laboratories Limited and trimmed its target price by nearly 5 percent from Rs. 1,040 to Rs. 990 per share, representing a downside of nearly 25 percent from its current price levels.
CITI Research has maintained its “sell” recommendation on the stock and further reduced its target price, pointing to a challenging outlook for the company in the upcoming quarters.
According to Citi, investor expectations around the GLP-1 market in Canada may be too optimistic, along with highlighting that regulatory approvals will be critical to future success, especially in light of Dr. Reddy’s mixed track record with complex filings.
Citi warned that falling sales of Revlimid, along with the end of certain production-linked incentives (PLIs), could hit the company’s EBITDA by about $750–780 million. While this impact will be tough to fully offset, continued supply of the remaining Revlimid inventory could still provide some earnings support over the next two quarters.
On the positive side, Dr. Reddy’s posted a solid 22 percent YoY jump in net profit, reaching Rs. 1,594 crore. Revenue also climbed 8.6 percent YoY to Rs. 8,506 crore for the quarter.
However, gross margins declined by 250 basis points QoQ compared to the previous quarter—marking the third straight quarterly drop. During the quarter, the company also highlighted ongoing pricing pressure in its core U.S. business, especially for gSuboxone, its biggest contributor apart from gRevlimid. As a result, there may be a need to temper near-term earnings expectations.
Financials & More
Dr Reddy’s Lab reported a significant growth in revenue from operations, experiencing a year-on-year rise of nearly 20 percent, from Rs. 7,114 crores in Q4 FY24 to Rs. 8,528 crores in Q4 FY25. Similarly, the company’s net profit increased during the same period from Rs. 1,310 crores to Rs. 1,587 crores, representing a rise of nearly 21 percent YoY.
The company’s revenue from operations grew at a 3-year CAGR of around 15 percent between FY22 and FY25, while the net profit jumped by about 38 percent CAGR over the same period.
Dr. Reddy’s Laboratories Limited is engaged through its three businesses – Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products – offering a portfolio of products and services, including Active Pharmaceutical Ingredients (APIs), generics, biosimilars and differentiated formulations.
Written by Shivani Singh
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