Buy Dr Reddys Laboratories: target of Rs 1430: ICICI Securities

What happened

ICICI Securities said Dr Reddy's Q2FY27 EBITDA and profit after tax beat its estimates by about 32% and 26%. US sales rose 9.5% quarter on quarter, helped by sugammadex and bosutinib launches. It maintained BUY with a higher target price of Rs 1,430.

Confirmed

Global impact / market context

A higher target price means ICICI Securities expects the share to be worth more than before. Raised earnings forecasts reflect better profit per sale in the base business, which can support the stock price if the company delivers the growth and margin guidance management repeated.

Analyst inference

Dr Reddy's is counting on new US launches and upcoming products to offset the loss of exclusive gRevlimid sales, which means selling that drug without exclusivity pressure. Gross margin of 51.7% was its best since that loss, signalling the base business is earning more per sale.

Analyst inference

What to watch

1. Management keeps its double-digit revenue growth guidance for sales excluding gRevlimid, and expects gross margins of 50–55% in the near term. Gross margin is the share of sales left after direct product costs. Confirmed
2. The company plans to relaunch semaglutide across markets in November and seeks USFDA approval of biosimilar abatacept in December, with the Bachupally plant inspection ongoing, according to the report. Proposed
3. Watch whether EBITDA margin, which means profit before interest, tax and depreciation as a share of sales, climbs toward about 25% in the next couple of years, and whether the Bachupally inspection clears without delaying the abatacept approval. Analyst inference

Evidence

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