Dr Reddy's Laboratories share price declines 6% post Q3 results: Should you buy, sell or hold?

Stock Market Today: Dr Reddy's Laboratories share price declined more than 6% in the morning trades on Friday post-Q3 results that were announced after the market hours of Thursday.

Dr Reddy's Laboratories share price opened at ₹1247.95 on the BSE on Friday, more than 3% lower than the previous day's closing price of ₹1289.35. Dr Reddy's Laboratories share price thereafter declined more than 6% to intraday lows of ₹1203.60.

Dr Reddy's Q3 Results

On Thursday, January 23, Dr Reddy's Laboratories reported that its consolidated profit after tax (PAT) for the quarter ended December 2024 (Q3) increased by 2% year-over-year (YoY) to ₹1,413.3 crore. Last year's third quarter PAT was ₹1,378.9 crore.

There was some despoilment with the US sales growth as North American Generics sales grew only 1% YoY to ₹33,834 crore (down 9% sequentially) even though India and emerging markets sales grew 12-14% YoY.

Analysts views

Jefferies India reacting to Dr Reddy's December quarter results said the weakness in core profitability shows an uptick in 3Q. Jefferies said Dr Reddy's 3Q underlying revenue growth moderated to 7.5% YoY, primarily due to flat US sales YoY. 

“Underlying EBITDA margins were also impacted, due to incremental competition in top products and high Selling General and Administrative costs. Dr Reddy's remains in an investment phase, with most catalysts likely to unfold in FY27 or beyond,” said Jefferies while lowering FY25-27 earnings per share estimate by 3-6%. Jefferies maintained ‘Underperform’ ratings with a revised price target of ₹1,170 on DRL stock.

Analysts at JM Financials said US business reported tepid sales due to lower sales of generic Revlimid sales used to treat multiple myeloma and price erosion. However, despite lower Revlimid sales, EBITDA margins remained healthy at 27.5% in Q3, as per analysts. 

During the earnings call, the company reiterated its confidence in overcoming the generic Revlimid slump post-FY26 led by the Semaglutide opportunity in Canada & rest of the world as well as Abatacept from Jan'27. Margins are likely to be maintained at ~25% with flexibility on SG&A as well as R&D spending, according to JM Financial's estimates.

JM Financial analysts believe the street is underappreciating the near-term Semaglutide opportunity in Canada as well as 18 other markets which are opening up from CY26. JM Financial post-Q3 maintained its estimates and BUY rating with a target price of ₹1,723.

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.