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Informist, Monday, Jul. 20, 2026

 

By Narayana Krishna

 

HYDERABAD – Lower contribution from the much-anticipated diabetes and obesity drug semaglutide and the absence of high-margin cancer drug Revlimid are expected to drag down Dr. Reddy's Laboratories Ltd.'s June quarter earnings. Net profit and revenues are likely to decline sharply on year. Weakness in sales in North America, coupled with pricing pressure, is also expected to weigh on performance, though growth in Europe and the domestic market is likely to provide some support.

 

Dr. Reddy's is expected to report a consolidated net profit of INR 7.8 billion for the June quarter, down nearly 45% from the year-ago quarter, according to the average of estimates from 15 brokerages. Net sales are estimated at INR 82.8 billion, down over 3% on year. On quarter, the net profit is expected to rise nearly 254% while revenues are likely to increase nearly 10%, aided by a low base in the March quarter.

 

Estimates for Dr. Reddy's June quarter net profit vary widely, with the highest estimate at INR 11.8 billion from Nirmal Bang Equities Pvt. Ltd. and the lowest at INR 6 billion from JM Financial Institutional Securities Pvt. Ltd. Revenue estimates range from a high of INR 92.5 billion from Elara Securities (India) Pvt. Ltd. to a low of INR 78.3 billion from PhillipCapital (India) Pvt. Ltd. The wide variation reflects differing assumptions of analysts on the company's performance recovery in North America and contribution from new launches such as semaglutide in India and Canada.

 

WEAK US SALES

Generic cancer drug Revlimid has lost its shine as more players have entered the US market with their versions, causing a fall in its price. Subsequently, the Revlimid market share of the company vanished due to competition and pricing pressure. The absence of Revlimid sales in the US is expected to significantly dent the company's income from North America.

 

Revlimid sales in the US had boosted earnings for companies like Dr. Reddy's for the past few years. Now, Dr. Reddy's sales in the US are likely to decline sharply on year because of the loss of Revlimid's contribution and continued pricing pressure in base products, according to ICICI Securities Ltd. and Nuvama Wealth Management Ltd. Brokerages Motilal Oswal Financial Services Ltd. and PhillipCapital also expect a steep fall in the US revenue while Kotak Securities Ltd. estimates minimal contribution from Revlimid during the quarter.

 

Contribution from semaglutide sales, launched in Canada in May, is expected to remain limited in the June quarter due to supply constraints and early-stage commercialisation.

 

Dr. Reddy's faced a setback in its semaglutide opportunity after identifying an impurity in the active pharmaceutical ingredient during scale-up, forcing the company to pause production and delay fresh supplies until around Oct–Nov. The company had initially expected to capitalise on the first-mover advantage, after the patent on semaglutide expired, with a planned output of about 12 million pens in FY27, positioning the drug as a key growth driver across India and other markets.

 

Following the disruption, Dr. Reddy's has nearly halved  its volume guidance to 6-7 million pens. The delay risks eroding its early-entry advantage in a fast-growing glucagon-like peptide-1 segment while also impacting near-term growth visibility and raising execution concerns around scaling up complex peptide manufacturing.

 

OTHER REGIONS

The company's India business is expected to grow by 12–14% on year, supported by traction in chronic therapies, innovation-led products, and healthy branded formulations portfolio, according to analysts.

 

Europe sales are likely to grow 10–12%, driven by the nicotine replacement therapy portfolio and new launches. Emerging markets, including Russia and other regions, are expected to grow 11–13%, aided by volume expansion and favourable currency movements, according to analysts.

 

Overall revenue growth is expected to remain muted, as gains in India, Europe, and emerging markets are likely to be offset by a sharp decline in North America. Profit is expected to fall more sharply than revenue due to the absence of high-margin Revlimid sales and an adverse product mix.

 

MARGIN PRESSURE

Dr. Reddy's operating performance is expected to weaken during the quarter. Earnings before interest, tax, depreciation, and amortisation are estimated to decline sharply on year, with consensus estimates indicating a fall of 30-40%. The company's EBITDA margin is expected to contract to 15-17% from over 25% in the year-ago quarter, primarily due to loss of high-margin products and pricing pressure.

 

The company's June quarter EBITDA is estimated at INR 14.4 billion, down nearly 37% on year but up over 47% on quarter. The highest estimate of INR 19.1 billion is from Elara Securities and the lowest is INR 11.1 billion from JM Financial. The variation in estimates reflects differing assumptions on cost control and product mix, according to the analysts.

 

Kotak Securities estimates the company's EBITDA at INR 12.8 billion for the June quarter with an EBITDA margin of 15.7%. Nuvama Wealth estimates EBITDA at INR 14.3 billion with a margin of 16.5%. Motilal Oswal expects the margin to be 15.5%, compared with over 25% for the year-ago quarter.

 

Analysts expect any meaningful ramp-up of semaglutide in Canada to only happen gradually, making this a key factor to watch. Progress on regulatory developments, including the abatacept biosimilar filing, and resolution of issues flagged by the US Food and Drug Administration at a biologics facility in Hyderabad to determine the future growth will also be tracked.

 

Key factors such as recovery in North America business, pricing trends in the US generics market, and updates on key regulatory filings and manufacturing compliance will also be in focus. Dr. Reddy's Laboratories will announce its June quarter earnings Wednesday.

 

Of the 13 research reports available on the company with Informist, seven have a "buy" or equivalent recommendation on the stock with an average target price of INR 1,537 per share, while three have a "hold" call with a target price of INR 1,314. The rest say "sell" with a price target of INR 1,244. The stock has fallen nearly 1% since Dr Reddy's announced its March quarter earnings. Monday, it closed at INR 1223.10 on the National Stock Exchange, up 1% from Friday. 

 

Following are the Apr-Jun earnings estimates for Dr. Reddy's Laboratories from 15 brokerage firms in INR billion, in descending order of the net profit estimate:

Brokerage	Net Sales	Net Profit	EBITDA
Nirmal Bang Equities Pvt. Ltd.	85.20	11.82	18.45
Elara Securities (India) Pvt. Ltd.	92.48	11.35	19.10
YES Securities (India) Ltd.	78.36	9.57	13.88
Antique Stock Broking Ltd.	84.50	8.65	15.21
Axis Securities Ltd.	86.13	8.07	15.53
Systematix Shares and Stocks (India) Ltd.	83.10	7.44	17.74
ICICI Securities Ltd.	82.98	7.03	12.78
PhillipCapital (India) Pvt. Ltd.	78.31	7.03	13.92
Nuvama Wealth Management Ltd.	86.36	6.97	14.26
Bank of America Global research	82.46	6.74	13.97
Prabhudas Lilladher Pvt. Ltd.	78.87	6.72	12.70
Motilal Oswal Financial Services Ltd.	82.31	6.67	12.76
Kotak Securities Ltd.	81.47	6.59	12.78
HDFC Securities Ltd.	80.07	6.53	12.41
JM Financial Institutional Securities Pvt. Ltd.	79.77	6.00	11.09
Average	82.82	7.81	14.44

 

End

 

US$1 = INR 96.44

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Shubhayan Bhattacharya

 

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