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Dr. Reddys Laboratories Q1FY27 revenues de-grew 5.5% YoY to ₹ 8099.8 crore

ICICIdirect Research 23 Jul 2026 DISCLAIMER

News: Dr. Reddys Laboratories Q1FY27 revenues de-grew 5.5% YoY to ₹ 8099.8 crore, pulled down significantly by the US business which de-grew 35% YoY to ₹2205 crore and PSAI which grew 4.1% YoY to ₹852 crore. The US business declined primarily on account of lower gRevlimid sales. The de-growth in US was stabilized by growth in other key geographies. Europe grew 13% YoY to ₹1444 crore (Nicotine Replacement Therapy portfolio in Europe de-grew 1% YoY to ~₹660 crore), India Business grew 17% YoY to ₹1717.7 crore, Russia and Other CIS business grew 24% YoY to ₹1120 crore and RoW market grew 42% YoY to ₹710 crore. The company undertook impairments and provisions (related to Semaglutide impurities) during the quarter aggregating to ~₹239 crore which led to EBITDA de-growth of ~60% YoY to ₹ 861 crore with margins dwindling by 1472 bps to 10.6%. GPM for the quarter also declined by 904 bps to 58.2%. Excluding the one-time impairment and provisions the EBITDA margins for the quarter stood at ~14%

View: Excluding US performance which obviously got impacted by lower gRevlimid sales, the overall print was decent. The pressure on margins (due to Middle east freight and logistical costs) is transient. The management has firm plans for GLP 1 opportunities, biosimilars and innovative products to be launched across the world(90+ countries). The idea is to fill the possible void after the complete genericization of gRevlimid (double digit growth guidance ex-US). R&D spend is expected to remain at ~7-8% of revenues, while base EBITDA margins are projected at ~20% despite the halt in Semaglutide supplies. Management is targeting sales resumption of the Semaglutide supplies by November 2026. A higher share of sales at the upper end of the pricing band, coupled with stronger traction in complex products, could potentially lift margins towards 25%. Overall, we believe DRL’s capability of complex launches on a consistent basis across geographies to be the key determinant for the future performance. That said, below-par quarterly performance is likely to weigh on stock in the near term. 

Impact: Neutral

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