Downgrade to SELL with a TP of Rs 2,275 (17x Jun19E). Dr. Reddys Labs (DRRD) posted weak numbers, with the top-line growing only ~3% YoY in 1QFY18. This was led by a 3% decline in the US business and a 10% decline in domestic revenues. The EBITDA margin came in at 9.2%, sinking ~700bps QoQ, with the gross margin plummeting to 51.5% during the quarter. Incremental competition in the US continues to erode profits in the absence of new lucrative product launches. The impact of GST on the domestic business also contributed to the margin decline. PAT was Rs 591mn, down 53% YoY despite the low base.