Dr. Reddy's Laboratories Ltd. announced its March quarter financial results, revealing a performance that fell short of market expectations. The pharmaceutical giant's Q4 earnings were significantly impacted by lower sales in North America and adjustments related to g-Revlimid, a key generic drug.
Q4 Performance Details
The company's Q4 results showed a notable decline across key metrics. Motilal Oswal Financial Services Ltd (MOFSL) reported that Dr. Reddy's Labs missed sales, EBITDA, and PAT estimates by 4%, 32%, and 43% respectively, even after accounting for shelf-stock adjustments related to g-Revlimid. North American sales, which had seen robust growth over the past three years, declined by 23% year-over-year in FY26 due to increased competition.
Nuvama Institutional Equities characterized Q4 as a “poor quarter,” noting a 12% year-over-year decline in revenue, a 48% drop in adjusted EBITDA, and a 68% decrease in adjusted PAT. These declines were attributed to a significant Rs 450 crore shelf stock adjustment and lower g-Revlimid sales, with margins also pressured by one-off impairment charges.
Brokerage Outlook and Future Prospects
Despite the challenging quarter, brokerage firms presented varied perspectives on Dr. Reddy's future trajectory:
- Motilal Oswal Financial Services (MOFSL): Maintained a 'Neutral' rating but cut its target price to Rs 1,195, citing the weaker Q4 performance and North American sales pressure.
- Nuvama Institutional Equities: While acknowledging the weak quarter, retained a 'BUY' rating, though it slightly reduced its target price from Rs 1,600 to Rs 1,550. Nuvama highlighted the company's future prospects revolving around the commercial success of Semaglutide in Canada and the anticipated Abatacpet approval in the US/Europe. The brokerage expects double-digit growth in the US business, excluding g-Revlimid, and stable margins between 22–25%.
- Choice Institutional Equities: Maintained an 'ADD' rating with a revised target price of Rs 1,335. Choice expressed a positive long-term view, believing the Q4 impact to be largely one-off. They anticipate growth driven by the launch of Semaglutide in India, Canada, and Brazil, coupled with planned biosimilar launches and innovative product introductions in India, which should support margin expansion.
Analysts largely agree that with the tapering impact of g-Revlimid, Dr. Reddy's growth story will increasingly depend on its new product pipeline, particularly Semaglutide and various biosimilars, which are expected to drive future revenue and margin expansion.