Dr Reddy's Shares Rally Despite Profit Dip
Shares of Dr Reddy's Laboratories Ltd. climbed nearly 8% during Monday's trading session, settling up 6.4% at Rs 1,303. This surge occurred despite the pharma major reporting a 36% year-on-year fall in net profit to Rs 913 crore for the quarter ended September 30, 2026. Revenue also saw a slight decline of nearly 2% to Rs 8,670.8 crore.
The positive market reaction was largely attributed to the company's EBITDA, which, despite a 14% YoY decline to Rs 1,731 crore, and margins contracting to 19.90%, still managed to surpass Street expectations. This better-than-anticipated margin performance signaled underlying strength for investors.
Brokerages Offer Diverse Outlooks and Targets
Following the Q2 results, several prominent brokerage firms updated their ratings and price targets for Dr Reddy's Laboratories, reflecting a mixed but generally optimistic outlook.
JPMorgan Upgrades Rating
Global brokerage JPMorgan upgraded Dr Reddy's Labs to 'neutral' from 'underweight', a significant shift after nearly four years. They set a new price target of Rs 1,270, noting that the stock's previous underperformance had created a more balanced risk-reward profile. The upgrade was supported by factors such as new product launches, a favorable business mix, enhanced cost efficiencies, and foreign exchange tailwinds.
Goldman Sachs Retains 'Sell' Despite Higher Target
In contrast, Goldman Sachs maintained its 'sell' rating on the stock, even while raising its target price to Rs 1,150. The firm increased its FY27-FY29 EPS estimates by up to 4%, anticipating mid-teens growth in India and Russia, and double-digit growth in the US (excluding Revlimid). However, Goldman Sachs expressed concerns regarding the generic Ozempic opportunity, a limited near-term pipeline of high-value products, and ongoing pricing pressure on established drugs.
Other Brokerage Recommendations
- CLSA retained its 'hold' rating, increasing its target price to Rs 1,280 from Rs 1,240. They cited revenue in line with expectations and margins beating estimates due to better cost controls and reduced R&D spending.
- HSBC issued a 'buy' rating with a target price of Rs 1,375, raising its FY27 EPS estimate by 8.1%. They remain positive on Dr Reddy's long-term growth and the potential from generic semaglutide.
- Choice Institutional Equities has an 'add' rating with a target of Rs 1,380.
- JM Financial, ICICI Securities, and Systematix all hold 'buy' ratings, with target prices of Rs 1,541, Rs 1,430, and Rs 1,461, respectively.
- Kotak maintained a 'reduce' rating with a target price of Rs 1,220.
- Nomura holds the most optimistic view with a 'buy' rating and the highest target price of Rs 1,730, implying a significant 33% upside.