升级为买入：司美格鲁肽引领盈利复苏

Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications intheDisclosure appendix, and with the Disclaimer, which forms part of it.Webelieve semaglutide saleswillhelp Dr Reddy’s to returnto EPS growth path within a year of launch in key marketsWe bake-in semaglutide sales of USD280m in FY27 (c18%of total EPS) mainlydrivenby pick-up in Canada marketUpgrade to Buy (from Hold);raise TP to INR1,445 (fromINR1,235) on semaglutide-led earnings growthrecoveryWhat isbeyond gRevlimid?The key market debate for Dr Reddy’s is how earningsshape upafter gRevlimidsales fall from cliff on30 January 2026. While the companyhas embarked onmultipleinitiatives–consumer health (NRT, Nestle JV),semaglutide,biologics and innovation–to sustain earnings growth beyond gRevlimid, the marketremains divided onscale-up of theseopportunities.We believe Dr Reddy’s is wellplaced to gain from launch of semaglutide (generic version of NovoNordisk’sblockbuster diabetes and weight-loss drug, Ozempic and Wegovy) inthenon-US,non-EUmarkets starting 2026.A recent court order in Indiahas restrained Dr Reddy’slaunch of semaglutide in export markets until the patent expiry of the referencebrand inIndia in March 2026(the next court hearingison 19 August 2025).Nonetheless,webelieve Dr Reddy’swill be amongthefirst companies to launchinkey marketsopeningup in 2026.Semaglutide: a big, fatopportunity:In the target markets–Canada, Brazil and India,currentsupply of semaglutide remains highly constrained versus demand.Multiplegeneric companiesare preparing to launch theirproducts,and we assumea high-scaletimelylaunchof semaglutideinjectionpens will be critical to gain market share.Unlikenormal generics, wedo notexpect significant fall in prices for semaglutidein view ofanextraordinarily strongvisible demand.On this backdrop, we expectsemaglutideopportunity size willexpand 2-3xin these marketsoverthenext 2-4years.For DrReddy’s, we bake-in semaglutide sales of USD280m in FY27(sales ofUSD224mfromCanada)assuming mid-singletolowdouble-digitunitmarket share.In the best-casescenario, we believeitcan garner semaglutide sales ofcUSD500m in FY27.Refer toExhibits1 and 2.Upgrade to Buy(from Hold); raise TP to INR1,445(from INR1,235):We revise ourFY26-28 estimates in view of evolving market dynamics for semaglutide and gRevlimid.We now assumesemaglutide launch in early FY27 in Canada, Brazil and India (earlierwe assumed launch only in Canada in 4QFY26). We reduced our sales estimates forgRevlimid in FY26 amidrising competition.These changes led to 5.1% cut in FY26EPS while our FY27/28 EPS estimates increased by 12-13%.We now valueitsbasebusinessEPS(excluding semaglutide)at target PE multiple of 25xand semaglutideat20x(earlier we valuedatconsolidated EPS)to arrive at sum-of-parts valuation.RefertoExhibit5.Our revised TP of INR1,445(from INR1,235) implies upside of15.4%.Weupgrade the stock rating to Buy from Holdas we believe pick-up insemaglutidesalesshould bring back Dr Reddy’s earnings on a positive trajectory.Our TP for the US ADRis USD16.90 (from 14.44).Dr Reddy's Laboratories(DRRD IN)Upgrade to Buy: Semaglutide-led earnings recovery ◆◆◆ -5.118.30.613.116.0 73%DRRD INREDY.BO03/2027e03/2028e65.0969.5258.1061.3112.013.457.3064.3319.218.00.613.311.913.412.81000.001250.001500.0006/25 2Financial statementsYear to03/2025a03/2026e03/2027e03/2028eProfit & loss summary(INRm)Revenue324,269345,414366,184391,820EBITA75,48276,55973,15478,904Amortisation-6,553-7,599-7,983-8,620Operating profit/EBIT68,92968,96065,17270,284Net interest4,7244,0004,2004,242PBT76,30276,12672,29677,213HSBC PBT76,30276,12672,29677,213Taxation-19,057-19,032-18,074-19,303Net profit56,54457,09554,22257,910HSBC net profit56,84457,09554,22257,910Cash flow summary(INRm)Cash flow from operations33,80949,02657,84162,234Capex-27,504-28,000-29,000-35,000Cash flow from investment-51,021-28,000-29,000-35,000Dividends-6,662-8,500-8,000-8,000Change in net debt49,693-23,580-32,375-31,968FCF equity6,30521,02628,84127,234Balance sheet summary(INRm)Intangible fixed assets108,613101,01493,03184,411Tangible fixed assets97,761114,708132,173154,439Current assets256,744290,853332,937372,830Cash & others62,71985,299116,674147,643Total assets492,989536,446588,012641,551Operating liabilities109,057104,919111,263115,892Gross debt46,76645,76644,76643,766Net debt-15,953-39,533-71,908-103,877Shareholders' funds333,388381,983428,205478,115Invested capital291,342316,357330,204348,145Ratio,growth and per share analysisYear to03/2025a03/2026e03/2027e03/2028eY-o-y % changeRevenue16.26.56.07.0EBITDA9.71.4-4.47.9Operating profit8.50.0-5.57.8PBT6.2-0.2-5.06.8HSBC EPS3.40.4-5.06.8Ratios (%)Revenue/IC (x)1.31.11.11.2ROIC21.017.015.115.5ROE18.516.013.412.8ROA12.210.59.18.9EBITA margin23.322.220.020.1Operating profit margin21.320.017.817.9EBITA/net interest (x)Net debt/equity-4.7-10.2-16.6-21.6Net debt/EBITA (x)-0.2-0.5-1.0-1.3CF from operations/net debtPer share data(INR)EPS Rep (diluted)67.8868.5465.