Dr. Reddy's pops 4% after Nuvama upgrades to 'Buy'; arm sells US mfg unit

Dr. Reddy’s Labs share price: Shares of pharmaceutical major Dr. Reddy’s Laboratories (Dr. Reddy’s Labs) rose sharply on Wednesday, January 8, 2025, climbing 3.99 per cent to an intraday high of Rs 1,404.60, nearing the 52-week high of Rs 1,420.20.

 

The surge in Dr. Reddy’s share followed an upgrade by domestic brokerage Nuvama, which raised its rating on the stock to ‘Buy’ from ‘Reduce.’ Nuvama has set a target price of Rs 1,553, representing an upside potential of 14.97 per cent from the previous close of Rs 1,350.75 on January 7.

 

In its report, Nuvama analysts highlighted the company’s proactive strategies to address potential challenges, particularly the upcoming expiry of the Revlimid patent in 2026. Revlimid currently contributes approximately 40 per cent to Dr. Reddy’s FY24 earnings before interest, tax, depreciation and amortisation (Ebitda). Analysts estimate that the company’s measures will mitigate 80 per cent of the expected Ebitda impact, supporting their favorable risk-reward outlook.

 

 

"We value the stock at 24x FY27E earnings per share (EPS), yielding a target price of Rs 1,553," Nuvama stated, adding confidence in the management’s ability to navigate revenue challenges. 

 

Key launches, including Semaglutide in Canada and the Abatacept biosimilar in the US, are expected to offset revenue losses from Revlimid’s patent expiration.

 

However, the brokerage noted risks such as potential delays in product approvals, which could impact future growth.

 

In a separate development, Dr. Reddy’s announced that its wholly-owned US subsidiary, Dr. Reddy’s Laboratories Inc., has entered into an agreement with Jaguar Labs Holdings, to sell all issued and outstanding membership interests of its wholly-owned subsidiary, Dr. Reddy’s Laboratories Louisiana LLC (DRLL). The sale includes DRLL’s manufacturing facility in Shreveport, Louisiana, for a nominal consideration of $1.

 

Following the transaction, Dr. Reddy’s Laboratories Louisiana LLC will cease to be a wholly-owned subsidiary of Dr. Reddy’s Laboratories Inc. and, by extension, a step-down subsidiary of Dr. Reddy’s Laboratories Limited.

 

About Dr. Reddy’s Labs 

 

Dr. Reddy's Laboratories is a prominent Indian pharmaceutical firm established in 1984 by Kallam Anji Reddy. The company specialises in a broad spectrum of products, including generics, biosimilars, and differentiated formulations. Dr. Reddy's Laboratories is involved in the production of active pharmaceutical ingredients (APIs), custom pharmaceutical services (CPS), and a diverse array of pharmaceuticals.

 

The company operates nine research and development (R&D) centres across India, the United Kingdom, the Netherlands, and Malaysia. The company maintains a global manufacturing footprint with 23 facilities worldwide including nine dedicated to API production and 14 focused on formulating finished products. Its international manufacturing presence includes locations in Mexico, the United Kingdom, the USA, and China.

 

The market capitalisation of Dr. Reddy’s is Rs 1,15,128.43 crore, according to BSE. The company falls under the BSE100 category.

 

At 10:00 AM, Dr. Reddy’s shares were trading 2.21 per cent higher at Rs 1,380.60 per share. In comparison, BSE Sensex was trading 0.35 per cent lower at 77,927.51 levels.