Dr Reddy's Q1 Results Preview: Analysts Outlook Mixed, See Double-Digit Growth

Dr Reddy's Laboratories Ltd. is set to announce its financial results for the first quarter of the financial year ending March 2026 on Wednesday.

Analysts said the early start of seasonality is likely to help the pharmaceutical major in the first quarter, particularly after fairly muted growth in April and May. Export pharma performance could be highly variable in the first quarter based on gRevlimid sales, its pricing trends and new product launches.

Key risks for the sector include upcoming tariffs on US shipments, competition in exclusive products, adverse outcomes of regulatory inspections and the inclusion of more products under the National List of Essential Medicines in India.

• Revenue seen 13.3% higher at Rs 8,693.3 crore.

• Ebitda seen 7.28% higher at Rs 2,332.3 crore.

• Margin seen at 26.8%.

• Net profit seen 8.1% higher at Rs 1,514.1 crore.

• BofA builds in double-digit India growth for Dr Reddy's.

• The price objective is Rs 1,500, in line with long-term sector multiples and factors in the tariff overhang.

• While the US is a significant driver, the company's dependence on the US for incremental core earnings growth is lower than its peers, which limits the downside risk.

• The ADR is valued at $17.65, in line with the primary listing.

Downside risks include:

• Higher-than-expected impact from the gRevlimid patent cliff.

• Adverse regulatory outcome on key US facilities.

• Delays in key product launches.

• Slower-than-expected ramp-up of the OTC platform.

• The June quarter North America sales for pharma majors continue to be driven by gRevlimid.

• They expect the second largest quarter-on-quarter North America sales jump for Dr Reddy's, with a 11% sequential increase.

• Most major firms are expected to register double-digit growth, with a few firms at high single-digit growth.

• Dr Reddy's is also expected to see 11% year-on-year growth.

• Data shows a sharp sequential uptick in gRevlimid sales for Dr Reddy's.

• Revenue is expected to grow at a modest pace of 9.4% annually, primarily driven by India with growth of 9.9%.

• US growth of 2.7% could moderate as companies start facing the brunt of lower sales of gRevlimid.

• They build in $125 million from gRevlimid for Dr Reddy's.

• A lower uptick in gRevlimid sales is likely to drag sales by approximately 2.2% year-on-year.

• However, in-licensing deals may continue to boost growth by 12% annually.

• Margin performance of Dr Reddy's versus Emkay's own expectations will remain contingent on any potential gross margin weakness being offset by operating expense control.

• They factor in base US sales (excluding gRevlimid) of $272 million, broadly flat quarter-on-quarter, and gRevlimid sales of $160 million, compared to approximately $150 million in Q4.

• They expect double-digit domestic growth, with Emkay estimating a 11% annual increase, in line with secondary sales growth.

• JM Financial's continuous investment preference remains for Dr Reddy's.

• While US growth is expected to grow tepidly by 9%, they expect incremental growth to come from the EU, growing 2.5 times year-on-year.

• Margins are expected to remain flat annually.