Nomura has upgraded Dr. Reddy’s Laboratories to a ‘Buy’ rating, with a target price of ₹1,500/share, citing underperformance in the stock and expectations of an upside from GLP-1 and biosimilar opportunities.
The brokerage noted concerns around the high contribution of gRevlimid revenues are already priced into the stock. In addition, the company’s operating expenses have surged, with R&D and SG&A costs rising by 29% and 27%, respectively, in 1HFY25. This increase was attributed to new initiatives such as clinical trials for biosimilars and infrastructure investments. Capex has more than doubled to ₹25 billion in FY25F, focusing on GLP-1 peptide APIs and injectables.
Nomura highlighted that the market is not fully factoring in the long-term potential of these growth drivers. With its strategic investments and a diversified product pipeline, Dr. Reddy’s is well-positioned for a recovery and long-term growth.
