HSBC has reaffirmed its bullish stance on Dr. Reddy's Laboratories, raising its target price to Rs 1,480 from Rs 1,410 and maintaining a ‘Buy' rating, as the brokerage sees multiple growth drivers beginning to fall into place. The revised target implies an upside of about 11% from the stock's previous closing price of Rs 1,330.50 on the NSE.
In a recent note, HSBC said delayed competitive entry in semaglutide markets and the potential US launch of an abatacept biosimilar could provide meaningful earnings support over the next two years.
HSBC said it remains constructive on Dr Reddy's semaglutide opportunity in Canada and other international markets, despite concerns about increasing competition. The brokerage expects Canada to evolve into a three-player market over the next few months, with generic versions from Dr Reddy's and Apotex competing against Novo Nordisk, the original developer of the blockbuster diabetes and obesity drug.
While pricing pressure is likely as more players enter, HSBC believes Dr Reddy's can still generate substantial gains in FY26. The company has secured 12 million units of semaglutide, which it intends to supply to more than 80 countries, supporting revenue visibility across global markets.
The brokerage believes the bigger catalyst lies in Dr Reddy's abatacept biosimilar. HSBC expects the drug to launch in the US in early calendar 2027, assuming the company receives a complete response letter-free approval from the US Food and Drug Administration and successfully launches its subcutaneous formulation in CY26.
If approved, the product could become a major contributor to Dr Reddy's biosimilars business. HSBC estimates biosimilar sales could reach $500 million to $700 million over the next four to five years, with abatacept playing a central role.
HSBC has raised its FY27-28 earnings per share estimates by 2.8% to 4.6%, reflecting a more optimistic outlook for semaglutide and abatacept. The brokerage values Dr Reddy's at 19.6 times FY28 earnings, broadly in line with its three-year average valuation multiple.
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