Broker’s call: Dr Reddy’s Lab (Hold)

Target: ₹1,449 CMP: ₹1,303 Dr Reddy’s quarterly earnings were above our expectations on the revenue front but lower on earnings.

On the revenue front, DRRD reported the highest-ever quarterly revenue of ₹8,038.

20 crore, with a robust y-o-y growth of 16.

5 per cent and 4.

4 per cent q-o-q, the increase was mainly driven by growth in the global generic business.

EBITDA reported at ₹2,076.

50 crore (+3.

4 per cent y-o-y and -2.

5 per cent q-o-q) and the margin saw a decline of 326 bps y-o-y and 184 bps q-o-q to 25.

8 per cent on account of change in the mix and one-time acquisition-related cost.

PAT saw a decline of 9.

5 per cent y-o-y and 3.

6 per cent q-o-q and stood at ₹1,341.

90 crore for the quarter.

The company is focusing on strengthening its core business across the markets with a robust product portfolio.

Dr Reddy’s growth story is based on the growth in the base business and high quality R&D efforts towards developing complex value products, including generic injectables, peptides, and biosimilars.

We expect Dr Reddy’s revenue/EBITDA/PAT to grow at a CAGR of 11.

6/11.

5/11.

2 per cent over FY24-27.

We have introduced FY27E and valued the stock at Sep-26E EPS and arrived at a TP of ₹1,449 (17x) with a Hold rating on the stock.

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