Dr Reddy's Laboratories is moving into a new earnings phase after the loss of gRevlimid exclusivity, a shift that is prompting analysts to reassess how the drugmaker's profits may normalize. Despite that reset, Nomura has maintained its Buy rating on the stock and kept its target price at Rs 1,740.
The brokerage expects a sequential improvement in profitability in the first quarter of FY27, with EBITDA margin seen at 17.4%. That suggests expectations of better operating performance even as the company adjusts to a business mix that is less dependent on the earlier contribution from gRevlimid.
North America Generics remains a key area to watch in this transition. As revenue from gRevlimid-related opportunities fades, investors are likely to focus more closely on the strength and stability of Dr Reddy's core generics business in the region and how it supports the next phase of earnings.
Nomura's stance indicates that it still sees value in Dr Reddy's after the post-gRevlimid reset. The central view appears to be that while the earnings base is changing, the company may still deliver improved margins and a steadier operating trajectory over the coming quarters.
