Dr. Reddy's Laboratories shares jump 2% as Q1 net profit jumps 2% YoY. Should you invest?

Shares of Dr. Reddy’s Laboratories jumped 2.4% to their day’s high of Rs 1,278 on the BSE on Thursday, July 24, after the pharmaceutical giant posted a marginal 2% year-on-year (YoY) increase in consolidated net profit to Rs 1,418 crore for the first quarter ended June. The modest profit growth comes despite a challenging pricing environment in the generics segment.

The company’s revenue from operations stood at Rs 8,545 crore, registering a healthy 11% YoY growth. However, on a sequential basis, net profit declined by 11% and revenue remained flat.

The revenue growth during the quarter was broad-based and supported by strong contributions from the recently acquired consumer healthcare portfolio in Nicotine Replacement Therapy (NRT), as well as sustained momentum in branded markets.


EBITDA rose 5% YoY to Rs 2,280 crore during the reporting quarter. Nevertheless, operating margins took a hit, declining 530 basis points to 56.9%. The margin compression was attributed to heightened price erosion in the generics segment and reduced operating leverage. A favourable product mix partly offset this.

After the company reported its Q1 results, domestic brokerage firm Nuvama has maintained a ‘buy’ rating on Dr. Reddy's Laboratories with a target price of Rs 1,486.

While the company’s quarterly results fell short of expectations, Nuvama noted that new growth drivers are emerging. Progress on semaglutide in Canada remains on track, and the company is planning to file for abatacept in the US.

A key positive surprise came from the Contract Development and Manufacturing Organization (CDMO) business, which is expected to contribute $100 million in FY26 and is targeting $300 million by FY30, Nuvama added.

Additionally, the management has reaffirmed its 25% margin guidance, supported by ongoing cost optimization efforts.

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