Dr Reddy's stock climbs as brokerages look past lenalidomide slump
By Rohit SharmaMarkets Analyst, Peepals Business
Representative image: jarmoluk / Pixabay
Dr Reddy's shares rose on October 26, 2026 after Q2 profit fell 36% to Rs 925 crore, as brokerages focused on a 7% sequential revenue rise.
What Happened
Shares of Dr Reddy's Laboratories rose sharply on Monday, October 26, 2026, the first trading session after the Hyderabad drugmaker reported a 36% year-on-year fall in second-quarter profit. The company said on October 23 that net profit for the July to September quarter fell to Rs 925 crore, mainly because sales of the cancer drug lenalidomide in North America dropped. Investors and several brokerages instead focused on a 7% rise in revenue from the previous quarter and steadier margins.
Key Facts
- Revenue for the quarter ended September 30, 2026: Rs 8,671 crore, down 1.5% year on year but up about 7% from the June quarter, according to the company.
- Profit after tax: Rs 925 crore, about 36% lower than a year earlier, a margin of 10.7% of revenue; profit before tax was Rs 1,228 crore.
- EBITDA (earnings before interest, tax, depreciation and amortisation): Rs 1,783 crore, about 24% lower, with the margin at 20.6% against 26.7% a year earlier, according to reported results.
- North America generics revenue: $264 million, down 29% year on year and up 12% from the previous quarter.
- India revenue was about Rs 1,851 crore, around 21% of the total; Europe revenue was €127 million, down 6% year on year.
- One market report put the stock at Rs 1,303 on Monday, up 6.4%, valuing the company at about Rs 1.08 lakh crore.
- JPMorgan and Jefferies upgraded the stock, to neutral and hold respectively, while Goldman Sachs kept a sell rating, according to market reports.
Why It Matters
Dr Reddy's is one of India's largest drugmakers and earns a large share of its money from generic medicines sold in the United States. A generic is a cheaper copy of a branded drug, sold after the original patent protection ends. For the last few years, the company earned unusually high profits from a generic version of lenalidomide, a drug used to treat a blood cancer called multiple myeloma. Those sales were always expected to shrink as more rival versions entered the US market, and this quarter shows that decline in the numbers.
The share price rise looks odd next to a 36% profit fall, but markets price what comes next. Compared with the April to June quarter, profit more than doubled and revenue rose about 7%. On the earnings call, chief executive Erez Israeli pointed to growth in India and emerging markets and to cost control, and repeated the company's aim of keeping EBITDA margins above 20% over time. Brokerages also discussed the company's plans for semaglutide, the ingredient in popular diabetes and weight-loss drugs, in markets where patents have expired.
Brokerage views were split. Citi kept a buy rating and raised its target to Rs 1,510, and HSBC and BofA Securities also have buy ratings, according to reports. JPMorgan moved from underweight to neutral with a target of Rs 1,270, and Jefferies upgraded to hold with Rs 1,320. Goldman Sachs stayed at sell with a target of Rs 1,150. These are the brokerages' own views and estimates, not forecasts by Peepals.
| Measure | Q2 FY27 | Change |
|---|---|---|
| Revenue | Rs 8,671 crore | -1.5% year on year, +7% on quarter |
| Net profit | Rs 925 crore | about -36% year on year |
| EBITDA margin | 20.6% | from 26.7% a year ago |
| North America generics | $264 million | -29% year on year, +12% on quarter |
Impact
Short-term: The stock's move shows the market had already expected the lenalidomide decline. Trading in the coming sessions is likely to follow brokerage revisions and any news on new US product launches.
Long-term: Dr Reddy's needs new products, including complex generics and drugs such as semaglutide in markets where it is allowed, plus steady growth in India and emerging markets, to replace lenalidomide profits. Its ability to hold margins above 20% will be the key test in the next few quarters.
Who is affected: Shareholders of Dr Reddy's, mutual funds that hold pharma stocks, employees, and patients in the US and India who use its generic medicines.
Key Takeaway
Dr Reddy's profit fell 36% as lenalidomide sales faded, but the stock rose because revenue and profit improved from the previous quarter.
Questions and Answers
Why did Dr Reddy's share price rise when profit fell?
Profit fell 36% from a year earlier to Rs 925 crore, but it more than doubled from the previous quarter and revenue rose about 7% on a quarterly basis. Several brokerages upgraded or held positive ratings, which supported the shares on October 26, 2026.
Why did Dr Reddy's Q2 profit fall?
The main reason was lower sales of lenalidomide, a generic cancer drug, in North America. North America generics revenue fell 29% from a year earlier to $264 million.
What did brokerages say about Dr Reddy's after Q2?
According to reports, Citi has a buy rating with a Rs 1,510 target, JPMorgan upgraded to neutral with Rs 1,270, Jefferies upgraded to hold with Rs 1,320, and Goldman Sachs kept a sell rating with Rs 1,150.
Is this advice to buy or sell Dr Reddy's shares?
No. The story reports the company's results and brokerages' published views. It is not investment advice.
Disclaimer: Prepared by the Peepals newsroom from publicly available sources with AI assistance. Information is accurate to the best of our knowledge at the time of publication and may change. Images may be representative. Not professional advice. Report an error via our contact page.
By Rohit Sharma, Markets AnalystCovers Markets Watch and more for Peepals Business. All stories by Rohit Sharma
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