The company’s net profit was Rs 443 crore, marking a sharp 69% plunge for the quarter under review, while revenue from operations stood at Rs 8,071 crore, a 6% decline from the corresponding quarter of the previous financial year.
Dr Reddy’s said that the company faced a semaglutide API-related impact of Rs 240 crore, including inventory provisions and other associated costs. EBITDA margin was further affected by higher solvent and freight costs arising from the Middle East conflict. Reported RoCE stood at 5.3%, while RoCE excluding the semaglutide API impact was 8%. The company had a net cash surplus of Rs 3,058 crore.
Also read: Dr Reddy’s aims to resume semaglutide supply by November after API fix
Should you sell Dr Reddy’s shares?
Motilal Oswal maintained its Neutral rating on Dr Reddy’s with a target price of Rs 1,121, implying 5% downside. The brokerage cut its earnings estimates by 2% for FY27 and 3% for FY28, factoring in higher operating expenses due to the Middle East conflict and moderate growth in the PSAI segment.
It expects earnings to decline in FY27 and recover from FY28, given the ongoing work to resolve the Semaglutide-related regulatory issue, commercial benefits from b-abatacept expected from 4QFY27 onward and a high FY26 base. Motilal Oswal values Dr Reddy’s at 20x 12-month forward earnings and said its Neutral stance reflects the company’s earnings trajectory and current valuations.
Systematix maintained its Hold rating on Dr Reddy’s with a target price of Rs 1,183, saying the quarter was materially weaker than expected. North America revenue was significantly below estimates as the company recorded no generic semaglutide supplies during the quarter, while all other business segments performed broadly in line with expectations. Adjusted for one-offs and including other income, EBITDA stood at Rs 10.9 billion, with a 13.5% margin, which was meaningfully below the brokerage’s expectations.
Read more: Dr Reddy’s flags quality issue in semaglutide batches, delays commercial suppliesDolat Capital downgraded Dr Reddy’s to Reduce from Buy and revised its target price to Rs 1,246, implying 5% downside, after Q1FY27 earnings came in below estimates even after adjusting for the Semaglutide-related inventory provision. The brokerage said the base business margin was lower than expected. Dolat Capital cut its FY27E and FY28E EPS estimates by 25.7% and 18%, respectively, factoring in lower Semaglutide sales, with management guiding for 6-7 million pens compared with 12 million earlier, along with lower-than-expected base business margins. The revised target price is based on 23x FY28E EPS.
During the quarter, the company received a Form 483 with seven observations following a pre-approval inspection at its biologics facility in Bachupally in June 2026 and responded within the stipulated timeline. It also said certain batches of Semaglutide were found to be out of specification due to an issue associated with the API.
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