Dr. Reddy's Laboratories Ltd. share price target

During Q4FY25, Dr. Reddy’s revenue stood at INR 85,284 Mn, up 19.9% YoY (+1.8% QoQ), above our estimates by 3.6%, driven by growth across key markets.
EBITDA stood at INR 20,747 Mn, up by 14.4% YoY (-8.7% QoQ), below our estimates by 7.0%, led by contraction in gross margins.

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...

• DRRD revenue, EBITDA, and PAT were largely in-line with our estimates.
• We expect the revenue to grow at 10.3% CAGR and PAT to grow at 5.2% CAGR over FY24-FY27E showing our confidence that the company is getting advanced in the biosimilars pipeline, key launches for cancer therapy and chronic constipation in India and launch of abatacept to gain market share.

Adjusted for the milestone payment received from Journey Medical Corp, 3QFY25 EBITDA for Dr Reddy’s was below street/our estimates. The PAT miss was higher on account of lower other income.

We maintain our BUY recommendation on the stock.

North America sales missed our estimates and reported US$ 395mn in 3QFY25 vs US$ 445mn in 2QFY25 impacted by gRevlimid

DRRD delivered in-line sales (adj. for NRT acquisition and milestone income) and marginally better operational performance in 3QFy25. Revenue/EBITDA YoY growth was moderate due to lower off-take of g-Revlimid and PSAI business, which was offset to some extent by healthy performance in the Russia market

we upgrade our recommendation on DR. RD to BUY from HOLD, with a target price of Rs 1,535/share and an upside potential of 20% from the CMP.

Revenue/EBITDA earnings above our and street estimates. APAT ~46% above estimates. Estimates adjusted for JV and impairment cost

Dr. Reddy’s Laboratories’ (DRL) Q2FY25 performance, adjusted for acquisition-related expenses (INR 561mn) and impairment charge of gNuvaring (INR 924mn), was ahead of our expectations

Dr. Reddy beat our revenue estimates (+3.7%) due to strong double-digit across geographies. EBITDA was largely in-line with our estimate (+2.4%). However, Adj. PAT missed our estimate due to higher-than-expected finance cost and tax expenses.

Adjusted for multiple one-offs, Dr Reddy’s’ 2QFY25 PAT was in line with our and street estimates. EBITDA was marginally ahead, aided by a sales beat in Russia and other emerging markets, and lower SG&A.

Dr Reddy’s Lab (DRRD) delivered in-line 2QFY25 performance. DRRD exhibited robust YoY growth in North America (NA), Russia, and ROW markets and a healthy scale-up in the pharmaceutical services and active ingredients segment.

The company met our estimates on revenue front and outperformed on gross/operating/net profitability in Q1FY25 on the back of stronger than anticipated growths in the US and PSAI while India came in line with expectations.
The company has acquired global consumer healthcare product associated with Nicotine Replacement Therapy (NRT) from Haleon PLC for GBP 500 Mn, in line with its stated strategy to invest in growth areas such as novel molecules, digital therapeutics, and consumer healthcare including OTC and wellness products.

We have HOLD rating on the stock