Brokerages see near-term upside in Dr Reddy's on Semaglutide, ex-US growth

Pharmaceutical behemoth Dr Reddy’s Laboratories posted a better-than-expected performance in the September quarter of financial year 2026 (Q2FY26), with brokerages highlighting strong growth outside North America and optimism around its upcoming Semaglutide launch. 

Dr Reddy’s Laboratories reported a consolidated Q2FY26 net profit of ₹1,437.2 crore, up 14 per cent Y-o-Y from ₹1,255.3 crore, with sequential growth largely flat. Ebitda rose 3 per cent Y-o-Y to ₹2,351.1 crore, yielding a 26.7 per cent margin. Revenue reached ₹8,805.1 crore, up 9.8 per cent Y-o-Y and 3 per cent sequentially.

 

Japan-based brokerage Nomura noted that the company’s results exceeded their cautious estimates, with sales, Ebitda, and PAT coming in 7 per cent, 21 per cent, and 18 per cent higher, respectively. The earnings beat was driven by stronger-than-expected contributions from gRevlimid, limited impact from GST rate changes in India, and lower overhead spending. 

 

 

While North American Generic (NAG) sales fell $72 million year-on-year (Y-o-Y), double-digit growth in other regions helped Dr Reddy’s maintain an Ebitda increase of 3 per cent Y-o-Y, offsetting price erosion in the US.

 

“Street expectations were muted, making the risk-reward favourable,” Nomura said, maintaining a ‘Buy’ rating on Dr Reddy’s Laboratories stock with a December 2026 target price of ₹1,650. The brokerage highlighted that Semaglutide approval from Health Canada, expected imminently, could provide near-term earnings upside. The company aims to be the first generic entrant in Canada, potentially gaining early-mover advantage in the market. The company also plans to file its biosimilar Abatacept by end-December 2025, although Nomura’s estimates currently do not factor in potential gains from this product.  ALSO READ | Should you bet on SBI Cards and Payment post its Q2? Analysts weigh 

Motilal Oswal described the quarter as ‘steady despite US pressure.’ Revenue and Ebitda beat expectations by 3 per cent and 5 per cent, while higher other income and lower taxes drove PAT 14 per cent above estimates. While North American sales continued to decline due to competition in gRevlimid and select products, other markets showed healthy Y-o-Y and quarter-on-quarter (Q-o-Q) growth, driven by base products and new launches. 

 

The brokerage maintained a ‘Neutral’ rating with a target price of ₹1,250, noting that future earnings will likely remain stable as new product launches and higher off-take of legacy products offset declining gRevlimid sales from Q4FY26 onward.

 

Those at Nuvama highlighted that Q2 revenue was in line with expectations, while Ebitda and adjusted PAT beat consensus by 2 per cent and 8 per cent. Gross and reported Ebitda margins contracted due to expected price erosion in gRevlimid and competitive pressures. Excluding Lenalidomide, Ebitda margins were calculated at 19-20 per cent, supported by reduced R&D spending. The brokerage retained its ‘Buy’ rating with a target price of ₹1,475, but expects Q3FY26 to be a weak-margin quarter, with attention focused on Semaglutide approval in Canada.  ALSO READ | Brokerages divided on Aditya Birla Sun Life AMC post Q2; Buy or sell? 

Choice Institutional Equities stressed upon Dr Reddy’s strong pipeline, including GLP-1, biosimilars, and generics, which are expected to offset Revlimid’s margin impact. Ex-US markets are projected to grow in double digits, while cost optimisation, strategic acquisitions, and partnerships should help restore margins to around 25 per cent by FY27. The brokerage revised FY27E estimates up by 4.9 per cent and increased its target price to ₹1,380, upgrading its rating to ‘Add.’

 

Across brokerages, the consensus view is that while US pricing pressure remains a headwind, growth in emerging and developed markets, cost-control measures, and early Semaglutide opportunities could provide meaningful upside. 

 

Analysts suggest that Dr Reddy’s underperformance relative to peers over the past five years, coupled with discounted valuations, makes the stock an attractive long-term play for investors.