JM Financial maintains Buy on Dr. Reddy's Laboratories, lowers target price to Rs 1418

Time of India

14-05-2025

JM Financial has maintained
Buy call
on
Dr. Reddy's Laboratories
with a revised target price of Rs 1,418 (Earlier Rs 1,723). The current market price of
Dr. Reddy's Laboratories Ltd.
is Rs 1234.95 Time period given by analyst is year when Dr. Reddy's Laboratories, the price can reach defined target. Dr. Reddy's, incorporated in 1984, is a Large Cap company with a market cap of Rs 103430.74 crore, operating in Pharmaceuticals sector.
Dr. Reddy's key products/revenue segments include Pharmaceuticals, Licence Fees, Spent Chemicals, Scrap, Service Income and Other Operating Revenue for the year ending 31-Mar-2024.
Financials
For the quarter ended 31-03-2025, the company has reported a Consolidated Total Income of Rs 9050.50 crore, up 6.08% from last quarter Total Income of Rs 8531.40 crore and up 23.79% from last year same quarter Total Income of Rs 7311.30 crore. The company has reported net profit after tax of Rs 1581.20 crore in the latest quarter.
The company's top management includes Mr.K Satish Reddy, Ms.Penny Wan, Dr.K P Krishnan, Mr.Arun M Kumar, Mr.Sanjiv Mehta, Ms.Shikha Sharma, Mr.Leo Puri, Ms.Kalpana Morparia, Dr.Claudio Albrecht, Mr.G V Prasad, Dr.Alpna Seth. Company has S R Batliboi & Associates LLP as its auditors. As on 31-03-2025, the company has a total of 83 crore shares outstanding.
Investment Rationale
JM Financial expects the FY26 topline to grow at 23% with EBITDA margins to remain at similar levels as FY25. They have revised the FY26E topline upwards by 8% on account of expected Revlimid sales being greater than those earlier anticipated. Beyond FY26, Semaglutide and Biosimilars (including Abatacept) are expected to drive business performance. DRRD plans to be present in all Semaglutide markets losing exclusivity in CY26, while Abatacept is scheduled for launch in CY27. The brokerage believes the Street is underestimating the Semaglutide opportunity for Dr. Reddy's. While it may not fully replace Revlimid sales, it could substantially mitigate the earnings decline in FY27. Though Canada, Brazil, India and China are the key Sema markets losing protection in CY26, a number of Emerging Market countries too are going off patent and thus JM Financial has increased its FY27E sales by 5% leading to a 6% increase in FY27E EBITDA. Further, the Indian Pharma companies are entering lower earning growth phase post FY26, thus we have reduced the 1 year forward P/E multiple by 19% to 21x. At an 21x PE Dr Reddys Laboratories on FY27 EPS, the stock remains attractive compared to peers. The brokerage maintains a BUY rating with a target price of Rs 1,418.
Promoter/FII Holdings
Promoters held 26.64 per cent stake in the company as of 31-Mar-2025, while FIIs owned 25.75 per cent, DIIs 25.45 per cent.