Dr Reddy's Labs shares tank 9% to 52-week low after Q1 show. Time to sell?

DRL share price: Dr Reddy's Laboratories' shares tumbled almost 9 per cent in early deals on Thursday, July 23, hitting a fresh 52-week low on the BSE after the company's June quarter results for the financial year 2026-27 (Q1 FY27) missed Street estimates. 

 

Brokerages lowered their earnings expectations for the upcoming quarters, further weighing on the stock. 

 

Dr Reddy's Labs share price declined 8.7 per cent to ₹1,080.05 at open, a fresh 52-week low. However, it recouped a majority of its losses and was trading 2.8 per cent lower as of 9.32 AM at ₹1149.75 apiece. At the same time, BSE Sensex was down 0.45 per cent at 76,415.

 

Dr Reddy's Labs Q1 Results

The pharmaceutical major's profit declined a whopping 68.7 per cent year-on-year (Y-o-Y) to ₹443.5 crore in the first quarter of FY27, dented by the end of lenalidomide sales, a ₹240-crore semaglutide inventory provision, and higher freight and solvent costs.

 

Revenue also declined by 5.5 per cent to ₹8,099.8 crore. Domestic brokerage Elara Capital said, the revenue missed its estimates by 9 per cent, driven by North America, Europe and Russia businesses, while India and RoW businesses compensated partly with superior growth.

 

EBITDA margin was at 13.3 per cent in Q1 FY27, adjusted for one-off Semaglutide inventory write-off, significantly below Street expectations in the high teens. 

 

The company said the impact of the absence of lenalidomide revenues would persist over the next few quarters as FY27 results are being compared with periods that included sales of the drug. READ MORE

Should you sell Dr Reddy's stock?

Brokerages largely remain bearish on Dr Reddy's Labs shares following the Q1 earnings show. Elara Capital said that while management guided for some pick-up in H2FY27, the estimates will still likely fall below current expectations.  

 

As a result, it slashed its FY27E-29E core earnings estimates by 7-29 per cent and also cut the target price for the pharma stock from ₹1,283 to ₹1,222 and retained 'Reduce' rating. 

 

At the same time, Emkay Global said that DRL's Q1 show was much weaker than estimates, with earnings downgrade cycle unlikely to ebb soon in the absence of a meaningful positive catalyst. It also lowered its FY27/28 earnings estimates by ~8 per cent/6 per cent and revised the target price downward by 8 per cent to ₹1,200 from ₹1,300 with a 'Reduce' call. 

 

Motilal Oswal Financial Services (MOFSL) also reduced its earnings estimates by 2 per cent and 3 per cent for FY27 and FY28, factoring in increased opex due to the Middle East conflict and moderate growth in PSAI segment. It has a 'Neutral' call on the stock with a target price of ₹1,125.

 

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