Dr Reddy’s Laboratories shares rose around 3% on October 26, 2026, despite the pharmaceutical company reporting a 36% year on year decline in Q2 FY27 net profit to ₹925 crore. The stock gained as investors focused on better than expected operating margins, improving domestic business performance and upcoming product launches. Brokerages remain divided, with Nomura, Citi and HSBC retaining Buy ratings, while Goldman Sachs maintains Sell and Jefferies has upgraded its rating to Hold.
Dr Reddy’s Share Price: Why Did the Stock Rise?
Dr Reddy’s Laboratories shares climbed as much as 3.8% to ₹1,275.80 on the NSE during Monday’s trading session. The rally followed the company’s September quarter results, which showed a sharp sequential recovery in profitability despite weaker year on year numbers.
The stock’s reaction reflects an important distinction between reported profit growth and underlying operating performance. While lower sales of generic lenalidomide in North America affected the annual comparison, improved gross margins, cost efficiencies and growth in India helped support the business.
Investors are now assessing whether these improvements can continue in the coming quarters, particularly as the company prepares for potential developments in semaglutide and biosimilar abatacept.
Dr Reddy’s Q2 FY27 Results: Key Numbers
Dr Reddy’s reported the following consolidated financial results for the quarter ended September 30, 2026.
| Financial metric | Q2 FY27 |
|---|---|
| Revenue | ₹8,670.8 crore |
| Year on year revenue change | Down 1.5% |
| Net profit | ₹925 crore |
| Year on year profit change | Down 36% |
| Sequential revenue growth | 7.4% |
| Sequential net profit growth | 109% |
| Gross margin | 52.1% |
| EBITDA margin | 20.6% |
The sequential improvement is particularly relevant because the previous quarter included a significant provision related to semaglutide. However, the annual decline shows that the company continues to face pressure in some international markets.
Dr Reddy’s Share Price: What 7 Brokerages Recommend
Brokerage firms have different views on the stock following the Q2 results. Their recommendations reflect differing expectations for future product launches, earnings growth and the sustainability of margins.
| Brokerage | Recommendation | Target price |
|---|---|---|
| Nomura | Buy | ₹1,730 |
| Citi | Buy | ₹1,510 |
| Jefferies | Hold | ₹1,320 |
| HSBC | Buy | ₹1,375 |
| BofA Securities | Buy | ₹1,480 |
| Kotak Neo | Reduce | ₹1,220 |
| Goldman Sachs | Sell | ₹1,150 |
1. Nomura: Buy, Target ₹1,730
Nomura retained its Buy rating but reduced its target price from ₹1,800 to ₹1,730. The brokerage said EBITDA and net profit exceeded its estimates, helped by cost control and a favourable product mix. However, it lowered its earnings estimates for FY27, FY28 and FY29, citing one time charges, lower semaglutide sales and the discontinuation of certain Novartis brands in India.
2. Citi: Buy, Target ₹1,510
Citi maintained its Buy rating and raised its target from ₹1,450 to ₹1,510. It highlighted stronger margins, operating leverage and cost efficiencies. The brokerage sees the improved operating performance as encouraging, although future growth will depend on whether these gains can be sustained.
3. Jefferies: Hold, Target ₹1,320
Jefferies upgraded its rating from Underperform to Hold and increased its target from ₹1,040 to ₹1,320. It cited better than expected profitability and improving performance in India and other international markets. The brokerage also identified the anticipated semaglutide supply resumption and potential US approval of biosimilar abatacept as important developments to watch.
4. HSBC: Buy, Target ₹1,375
HSBC retained its Buy rating with a target price of ₹1,375. It highlighted the expected resumption of semaglutide supplies and potential abatacept approval as catalysts. However, successful execution and the company’s ability to gain market share will be important.
5. BofA Securities: Buy, Target ₹1,480
BofA Securities maintained its Buy rating and ₹1,480 target, citing stronger gross margins and the potential contribution of abatacept. The brokerage noted that Dr Reddy’s achieved an EBITDA margin close to 20% despite the absence of semaglutide sales at the expected level.
6. Kotak Neo: Reduce, Target ₹1,220
Kotak Neo retained its Reduce rating but raised its target from ₹1,125 to ₹1,220. It acknowledged the margin recovery but expressed concerns about sustainable earnings drivers, noting that potential benefits from upcoming products may already be reflected in the valuation.
7. Goldman Sachs: Sell, Target ₹1,150
Goldman Sachs maintained its Sell rating while raising its target from ₹1,100 to ₹1,150. The brokerage recognised the better margin performance but flagged uncertainty surrounding the size of the semaglutide opportunity in Canada.
What Could Drive Dr Reddy’s Shares Next?
The resumption of semaglutide supplies across key markets is an important development to monitor, with the company expecting a relaunch in November 2026. The potential US approval of biosimilar abatacept in December 2026 could also support future growth, subject to regulatory decisions and commercial execution.
Meanwhile, the Indian business recorded 17.2% year on year revenue growth, helping offset weaker North American sales. Sustained domestic demand and successful new product launches could support the company’s longer term earnings outlook.
Key Risks for Investors
Dr Reddy’s faces pricing pressure and competition in North America, particularly in generic medicines. Delays in product launches, regulatory setbacks or weaker than expected sales could affect profitability. Investors should also consider whether the improved margins can be maintained without temporary benefits from product mix or cost reductions.
The divergence between brokerage targets highlights uncertainty about the company’s future earnings. A higher target price does not guarantee a corresponding share price increase.
Conclusion
Dr Reddy’s shares rose despite a 36% annual decline in Q2 FY27 profit because investors focused on the sequential recovery in margins and potential future product launches. Four brokerages in the table maintain Buy ratings, while Jefferies recommends Hold, Kotak Neo recommends Reduce and Goldman Sachs maintains Sell.
The key factors to watch are the recovery in North American sales, semaglutide supply resumption, potential abatacept approval and the sustainability of margins. Investors should assess these developments alongside valuation and risk before making decisions.
Frequently Asked Questions
1. Why did Dr Reddy’s shares rise despite a profit decline?
Dr Reddy’s shares rose as investors focused on better than expected profitability, sequential margin recovery and potential future product launches. Although net profit declined 36% year on year, it increased 109% from the previous quarter. Expectations surrounding semaglutide and abatacept also supported market interest.
2. What was Dr Reddy’s Q2 FY27 net profit?
Dr Reddy’s Laboratories reported consolidated net profit of ₹925 crore for Q2 FY27, down 36% from the corresponding period last year. The decline was primarily linked to lower lenalidomide sales in North America and a challenging comparison with the previous year’s earnings.
3. What is Nomura’s target price for Dr Reddy’s shares?
Nomura maintained its Buy rating and reduced its target price to ₹1,730 from ₹1,800. The brokerage highlighted better than expected operating profitability but lowered its earnings forecasts because of one time charges, lower semaglutide sales and the discontinuation of certain Novartis brands in India.
4. What is Citi’s recommendation for Dr Reddy’s stock?
Citi maintained its Buy recommendation and raised its target price to ₹1,510 from ₹1,450. Its positive assessment reflects improved margins, cost efficiencies and operating leverage. Investors should still monitor whether these improvements continue in subsequent quarters.
5. Why did Jefferies upgrade Dr Reddy’s to Hold?
Jefferies upgraded the stock from Underperform to Hold and raised its target to ₹1,320 from ₹1,040. The brokerage cited better than expected profitability and improving performance in India and other markets, while identifying semaglutide and abatacept developments as potential catalysts.
6. What is the outlook for semaglutide sales at Dr Reddy’s?
Dr Reddy’s expects to resume semaglutide supplies across key markets in November 2026. The commercial impact will depend on successful supply restoration, regulatory requirements, market demand and competition. Investors should distinguish the expected timeline from confirmed commercial sales.
7. What is the potential impact of abatacept on Dr Reddy’s?
Biosimilar abatacept could become a future growth driver if it receives the necessary regulatory approvals and achieves commercial success. Analysts have highlighted potential US approval in December 2026 as a catalyst. However, approval timelines, competition and market uptake remain uncertain.
8. Why did Dr Reddy’s profit fall 36% year on year?
The decline was mainly attributed to lower sales of generic lenalidomide in North America and a high comparison base. Revenue also fell 1.5% year on year. Nevertheless, the company recorded sequential improvement in revenue, profit and margins during Q2 FY27.
9. What are the main risks for Dr Reddy’s investors?
Key risks include pricing pressure in the US generics market, regulatory delays, weaker product sales and uncertainty surrounding semaglutide’s commercial recovery. The stock’s valuation is another consideration because expectations for future launches may already be reflected in its market price.
10. Should investors buy Dr Reddy’s shares after the rally?
The rally alone is not enough to determine whether the stock is attractively valued. Investors should assess earnings sustainability, product launch execution, North American demand, margins and valuation. Brokerage recommendations offer different perspectives, but none guarantees future share price performance.
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Parvati Rai is the Vice President of the Research team at Equentis. She has over 15 years of equity-research and strategy-consulting experience. A specialist in deep-dive valuations, financial modelling, and forecasting, she has built research desks from the ground up, by steering buy-side, sell-side, and independent coverage across sectors. When she isn’t fine-tuning models, Parvati unwinds on nature treks and mentors aspiring analysts.
