Nomura has a “buy” recommendation on Dr. Reddy’s Laboratories with a price target of ₹1,575, which implies a potential upside of 16.6% from Wednesday’s close.
Dr. Reddy’s has a key concern, and that is with regards to its profitabilty beyond its key drug gRevlimid, which will decline from financial year 2026 and beyond
The latest disclosures in 20-F filings suggest that global oncology generic sales increased to $1.02 billion in FY25 from $230 million in FY22, which was prior to the launch of the gRevlimid in the US.
Nomura is of the view that a large part of the increase can be attributed to contribution from gRevlimid. Here are the four factors that can drive future growth for Dr. Reddy’s, according to Nomura:
Growth in base business
The management expects to deliver double-digit growth, excluding gRevlimid in the base business. This excludes Semaglutide sales.
Significant upside from Semaglutide
The management said Dr Reddy’s is well-positioned to address the Semaglutide generic opportunity in Canada, where it will go generic in January 2026, and later in other emerging markets as well.
It said that Canada is the most lucrative near-term opportunity for the company, and could result in sales of up to $400 million, in a best case scenario. Other interesting emerging markets will be Brazil, Turkey, India, among other over 80 countries.
Acquisition Opportunities
Nomura said Dr Reddy’s has a net cash balance of $250 million as of March 2025, supported by upside from gRevlimid. The company can still undertake acquisition of up to $2.5 billion, as per its management. However, it will remain selective and conscious of valuations.
Cost reduction
Research and development (R&D) and selling, general and administrative expenses (SG&A) made up 37% of the company’s sales in FY25. The management can reduce spend by approximately 500 basis points to ensure the earnings before interest tax depreciation and amortisation (EBITDA) margins are around 25%, Nomura said.
Of the 39 analysts that have coverage on the stock, 17 have a “buy” rating, nine have a “hold” rating and 13 have a “sell” rating.
Shares of Dr. Reddy’s Laboratories are off the highs of the day, currently trading 0.7% higher at ₹1,360.3. The stock is up 14% in the last one month.
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