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Dolat Capital Report
Dolat Capital has downgraded Dr. Reddy's Laboratories Ltd.' to 'Reduce' from 'Buy' and cut its target price to Rs 1,246 from Rs 1,519 following a weaker-than-expected June-quarter performance and lower earnings visibility, despite adjusting for a Rs 240-crore provision related to semaglutide API inventory and associated costs.
The disappointment was largely due to weaker core business margins and a sharp decline in the high-margin US business.
Valuation
Dolat Capital expects earnings per share compound annual growth rate of 2.7% over FY26-28E.
With limited upside, the brokerage downgrades its rating to ‘Reduce' from ‘Buy' with a revised target price of Rs 1,246, valuing at 23 times FY28E EPS.
Key upside: Higher than expected Semaglutide and US sales and higher than expected base business margin.
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