Shares of Dr Reddy's Laboratories Ltd. were upgraded to 'buy' by analysts at Nuvama Institutional Equities, citing strategies to mitigate the impact of Revlimid patent expiry in 2026.
Revlimid patent expiry poses a "significant" threat to the Indian pharma major's earnings growth, Nuvama said in a report. The drug contributed about 40% to its fiscal 2024 Ebitda.
The brokerage assigned a target price of Rs 1,553 per share to the stock, implying an upside of 14.8% from the previous close. The Hyderabad-based company "is on top of this (patent expiry)", and the management "has mapped out strategies to mitigate the impact of Revlimid loss".
Key asset launches in Canada and the US are expected to largely offset revenue and Ebitda losses from the Revlimid patent expiry, the brokerage said. Margins could stay at levels within management's guidance, it said. "We reckon Dr. Reddy's proactive measures shall mitigate about 80% of the expected Ebitda impact."
The reduction in the research and development expenditure in financial year 2026 will also soften the impact on Ebitda from the Revlimid patent expiry, it said.
The pharma giant has gained ranks in India and can benefit from vaccine distribution, the Nestle joint venture and field force expansion, Nuvama said. The company's businesses in India, Russia and China have growth levers for a few years, it said.
In December last year, Nomura upgraded the stock to a 'buy' rating from 'neutral' as it saw favourable risk-reward for the firm. The brokerage had also raised the stock's target price to Rs 1,500 apiece.
Shares of Dr. Reddy's have risen 17% during the last 12 months. The relative strength index was at 59.
Fifteen of the 40 analysts tracking the company have a 'buy' rating on the stock, 12 suggest a 'hold' and 13 have a 'sell', according to Bloomberg data. The average of 12-month analysts' price target implies a potential upside of 1.3%.
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