Apr'25 View on Dr Reddys Laboratories Ltd

Dr. Reddy's Laboratories Ltd is a leading India-based pharmaceutical company which offers a portfolio of products and services, including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical services (CPS), generics, biosimilars and differentiated formulations. • DRRD reported a 6% miss on adjusted EBIDTA in Q3FY25. • We expect earnings to grow by 0.0% in FY26E & de-grow by 12.3% in FY27E. • At 35X ex-gRevlimid FY26E EPS, we believe valuations are rich. • Stock is currently trading at valuation of 22.0x P/E FY27E EPS. • Retain REDUCE with a FV of Rs1,240 (Rs1,295 earlier). Q3FY25 Earnings Update: Positives: • DRRD’s Q3FY25 sales at Rs8381.2cr (+16% yoy) were 3% higher than estimates. • Gross margins expansion yoy was due to an improvement in the product mix. • Uptick in DRRD’s subpar organic domestic performance is critical. Negatives: • DRRD’s US sales declined 10% qoq to US$40.1 cr (-11% versus KIE). • Even organic domestic growth was sluggish at 5% yoy. • Absence of any meaningful ANDA approval for DRRD stays a concern.