Shares of Dr. Reddy’s Laboratories surged 3.06% to Rs 1,285.60 on Wednesday after the company reported its Q1 FY26 financial results. The stock touched an intraday high of Rs 1,287.90 and now commands a market capitalization of Rs 1.07 lakh crore.
For the quarter ended June 30, 2025, the pharmaceutical major posted a consolidated net profit of Rs 1,418 crore, up 2% year-on-year. Revenue from operations stood at Rs 8,545 crore, reflecting an 11% YoY increase, primarily driven by contributions from the acquired Nicotine Replacement Therapy (NRT) portfolio and steady performance in branded markets.
However, profit declined 11% quarter-on-quarter, while revenue remained flat sequentially. EBITDA for the quarter was Rs 2,280 crore, marking a 5% YoY increase, though EBITDA margin slipped 530 basis points to 56.9%, largely due to pricing pressure in the US generics segment and lower operating leverage.
The Global Generics segment recorded Rs 7,560 crore in revenue, up 10% YoY, but remained unchanged QoQ. Revenue from North America declined 11% YoY to Rs 3,410 crore amid price erosion in key generics like Lenalidomide.
Meanwhile, India revenue grew 11% YoY to Rs 1,470 crore, aided by new launches and pricing strategies. European business saw a sharp 142% YoY jump to Rs 1,270 crore, driven by the NRT acquisition and product launches.
Brokerages offered a cautious outlook on Dr. Reddy’s Laboratories following its Q1 FY26 results, primarily due to concerns over the US generics business. CLSA and Jefferies both retained their ‘Underperform’ ratings, with target prices of Rs 1,120 and Rs 1,100 respectively. CLSA noted that while overall earnings were in line with expectations, the US base business is expected to remain flat or grow in low single digits year-on-year, with Revlimid sales likely tapering off from Q3FY26. Jefferies flagged a miss in Q1 estimates due to a sharper-than-expected decline in US sales, driven by lower revenues from gRevlimid and sustained pressure in the base portfolio. Elevated SG&A and R&D spending also weighed on margins. However, it highlighted upcoming launches such as gOzempic in Canada and the US filing for Abatacept as key triggers to watch. Meanwhile, Morgan Stanley maintained an ‘Equal-weight’ rating with a target price of Rs 1,298, acknowledging steady growth in most markets but citing generic price erosion and reduced operating leverage as drag factors on margin.
Dr. Reddy’s Q1 YoY Comparison Table (in Rs crore):
| Metric | Q1 FY26 | Q1 FY25 | YoY % Change |
|---|---|---|---|
| Revenue from Operations | 8,545 | 7,700 | 11% |
| Net Profit | 1,418 | 1,390 | 2% |
| EBITDA | 2,280 | 2,170 | 5% |
| EBITDA Margin (%) | 56.9% | 62.2% | -530 bps |
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