Dr Reddy's shares in focus after Q4 net profit tumbles 86% YoY; Morgan Stanley, Goldman Sachs weigh in

Synopsis

Dr. Reddy's Laboratories shares: The pharma major posted a sharp 86% YoY drop in Q4FY26 consolidated net profit to Rs 221 crore, compared with Rs 1,587 crore a year ago. Following the weak earnings performance, several brokerages cut their target prices on the stock.

Shares of Dr Reddy's Laboratories will remain in focus on Wednesday after the pharma giant reported 86% year-on-year (YoY) decline in consolidated net profit to Rs 221 crore for the January-March quarter of FY26, as against Rs 1,587 crore in the year-ago period, leading to target price cuts by brokerages.

The company released its results in the post-market hours of Tuesday. Its revenue from operations, meanwhile, fell 12% YoY to Rs 7,516 crore during the quarter under review, from Rs 8,506 crore reported in the corresponding quarter of the previous financial year.

The decline in quarterly earnings was primarily on account of reduced sales of Lenalidomide, price erosion in North America and Europe Generics and a one-time SSA impact.

Along with the Q4 results, Dr Reddy's Laboratories recommended a final dividend of Rs 8 per equity share for the financial year 2026, subject to shareholders’ approval at its upcoming Annual General Meeting (AGM). The record date to determine the eligibility of shareholders set to receive dividend has been fixed on July 10.

Morgan Stanley on Dr Reddy's Laboratories

The international brokerage noted that the company’s adjusted Q4 revenue and EBITDA missed estimates by 2% and 13% respectively, with semaglutide ramp-up slightly delayed as the firm awaits Brazil’s approval, ET Now reported. It added that the management now expects 6-7 million pen sales in 2026, and more than 40 million capacity by FY28.

Morgan Stanley highlighted that the company’s US business is stabilising post gRevlimid launch with double-digit FY27 growth guidance. It cut FY27/28 EPS estimates by 3% and 3.5% respectively, as it sees execution risks and weak US generics backdrop keeping margin outlook subdued.

Goldman Sachs on Dr Reddy's Laboratories

The international brokerage highlighted that Q4 revenue and EBITDA margin missed estimates amid lower lenalidomide sales, with one-time shelf stock adjustments impacting profitability, ET Now reported. It revised FY27-28 EPS estimates by -9% to +3%.

Goldman Sachs is concerned about the overall gOzempic opportunity in Canada, and sees a thin near-to-medium term pipeline for higher value products, the report further said. It sees key base business products facing intense price erosion.

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