Dr. Reddy's Q4 hit by lower Revlimid; analysts warn of two key risks

Shares of Dr Reddy's Laboratories will be in focus on Wednesday, May 13, after the pharmaceutical major reported a weak March quarter performance, impacted by lower sales of Lenalidomide, the generic version of Revlimid, along with a one-time shelf stock adjustment (SSA).

The company said the exceptional items impacted revenue growth by 5.3% year-on-year and EBITDA margin by 6.5% during the fourth quarter of FY26.

Despite the weak quarter, management maintained its outlook of achieving double-digit revenue growth along with margins of around 25%.

Street divided on outlook

Nomura maintained its 'Buy' rating on the stock with a target price of ₹1,600 per share.

The brokerage said that after adjusting for one-off items, sales were 1% ahead of estimates, while EBITDA came in 3% below expectations.

Nomura said that the company expects double-digit revenue growth across all markets excluding North America Generics (NAG). Even within NAG, excluding contributions from gRevlimid in FY26 and the expected contribution from Semaglutide in Canada in FY27, the company still expects double-digit growth.

The brokerage also said management guidance of gross margins in the range of 50% to 55% going ahead, compared to the adjusted gross margin of 48% reported in the March quarter.

EBITDA margin, including other income, is expected to remain around 20%, excluding Semaglutide contribution.

Morgan Stanley retained its 'Equalweight' rating with a target price of ₹1,215.

The brokerage said adjusted revenue and EBITDA were 2% and 13% below its estimates, respectively. It also flagged a slight delay in the Semaglutide ramp-up due to pending approval in Brazil.

According to the brokerage, Dr Reddy's expects sales of 6 million to 7 million pens in calendar year 2026 and plans to scale up capacity to over 40 million by FY28.

Meanwhile, Jefferies maintained its 'Underperform' rating with a target price of ₹1,040.

The brokerage said the March quarter performance missed estimates materially, even after adjusting for multiple one-off factors. It added that margins were impacted by weak US business performance and elevated SG&A expenses, despite growth in India, Russia and Europe.

Jefferies also cautioned that slower-than-expected uptake of Semaglutide in Canada and delays in the launch of Abatacept could pose downside risks to estimates.

Shares of Dr Reddy's Laboratories ended 0.97% lower on Tuesday at ₹1,267.50. The stock has gained just 1% so far this year.