Dr Reddy's Laboratories Reports 86% Year-over-Year Decline in Q4 Profit, Shares Experience Volatility

Dr Reddy's Shares Swing Between Gains and Losses After Reporting 86% YoY Drop in Q4 Profit

Shares of pharma major Dr Reddy's Laboratories experienced a volatile trading session on Wednesday, 13 May, following the company's report of an 86% year-on-year (YoY) drop in its March-quarter (Q4FY26) profit. The stock's share price opened at ₹1,220.20 against its previous close of ₹1,270.10 and reached an intraday high of ₹1,303.55, a 2.6% increase. However, the stock erased all gains and declined as much as 4% to hit an intraday low of ₹1,220.20.

The company's Q4FY26 consolidated net profit dropped 86% YoY to ₹220 crore. Even sequentially, or on a quarter-on-quarter (QoQ) basis, the profit fell by nearly 82%. Revenue for the quarter dropped 11.64% YoY and nearly 14% QoQ to ₹7,516.2 crore. EBITDA declined 60% YoY and 52% QoQ to ₹980 crore for the March quarter, while gross margin in Q4FY26 declined 1,074 basis points YoY and 881 basis points QoQ to 44.8%.

Brokerage firms have largely maintained their views on the stock but trimmed their estimates, discounting lower margins for the base business.

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ICICI Securities maintained an "add" view on the stock, while reducing the target price to ₹1,365 from ₹1,435 earlier. ICICI also cut its FY27-28E EPS estimates by nearly 5% to factor in lower margins for the base business. "Management has maintained its ex-Revlimid revenue growth and margin guidance for the near term, while better traction in global generic semaglutide sales could scale its EBITDA margin back to 25%. DR Reddy's ability to capture market share in the global generic semaglutide opportunity and the timely approval of biosimilar abatacept in the US and Europe are the two main catalysts for growth revival off the high base of Revlimid," ICICI Securities said.

Motilal Oswal has a neutral view on the stock with a target price of ₹1,195, suggesting a 6% downside potential. Motilal pointed out that Dr Reddy's earnings decelerated in FY25 and FY26 after recording a robust show during FY20-25. It expects the earnings to further decline in FY27 due to a lower pace of niche launches.

Equirus Securities has a "short" view on the stock with a target price of ₹1,091, as the brokerage firm expects downward revisions to Street estimates, given the muted base business performance. "DR Reddy’s Q4 EBITDAM at 14.8% was muted and reflected that its underlying business has been weak over the last three years, but it was completely masked by the gRevlimid contribution. DRRD indicated that margins for the underlying business are expected to remain range-bound, while Semaglutide and Abatacept are expected to uplift margins going forward. We are building in 19% and 20% margins in FY27E and FY28E, respectively," Equirus said.

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Technical experts also do not appear to be bullish about the stock at the current juncture. Jigar S. Patel, Senior Manager of Equity Technical Research at Anand Rathi Share and Stock Brokers, highlighted that Dr Reddy’s Labs shares are currently taking support near the flat Ichimoku cloud zone, indicating that the stock is attempting to stabilise around key support levels. However, Patel underscored that momentum indicators are gradually turning negative, suggesting that bullish strength remains limited at present.