Synopsis: Dr. Reddy’s Laboratories faces a temporary semaglutide supply disruption. Here’s what HSBC and Morgan Stanley expect for earnings, commercial supplies, and the company’s long-term growth outlook.
The article outlines the views of a global brokerage on this pharma company, which is a leading India-based pharmaceutical company that offers a portfolio of products and services, including Active Pharmaceutical Ingredients, Custom Pharmaceutical Services, generics, biosimilars and differentiated formulations.
With a market capitalization of Rs 1,02,290 crore, Dr Reddy’s Laboratories Ltd’s share closed at Rs 1,226 per share, down by 0.35 percent from the previous day’s close. The share of the company gave a return of 13 percent in the last 5 years
HSBC On Dr Reddy’s
HSBC has maintained its Buy rating on Dr. Reddy’s but lowered the target price to Rs 1,460 per share from Rs 1,540, implying a potential upside of around 25.6 percent. The brokerage believes the recent semaglutide supply disruption is temporary and continues to see strong long-term growth potential, supported by the company’s early-mover advantage in key markets.
Temporary supply disruption
HSBC expects Dr. Reddy’s commercial supplies of semaglutide pens to resume from November 2026 after an API-related issue led to a temporary production halt. The brokerage does not expect any commercial supplies between now and September 2026, resulting in lower sales during the near term.
Sales estimates revised lower
Due to the temporary disruption, HSBC has reduced its semaglutide sales estimates for FY27 and FY28, assuming lower supply volumes than previously expected. The brokerage has also lowered its FY27 to FY29 earnings per share (EPS) estimates to reflect the expected impact on semaglutide sales.
Long-term outlook remains positive
Despite the near-term setback, HSBC believes the long-term opportunity for semaglutide remains intact. It has retained its Buy rating on Dr. Reddy’s, citing strong long-term growth drivers and the company’s early-mover advantage in key markets, which could support future earnings once supplies normalise.
Morgan Stanley On Dr. Reddy’s
Morgan Stanley has maintained its Equal-Weight rating on Dr. Reddy’s with a target price of Rs 1,215 per share. The brokerage believes the semaglutide delay is temporary, while the company’s long-term strategy and demand outlook remain unchanged.
API issue delays launch timeline
Morgan Stanley said an API impurity detected in semaglutide validation batches has delayed the start of commercial supplies of the injectable product. However, the brokerage noted that the issue is limited to validation batches and does not affect existing commercial supplies.
No impact on safety or approvals
The brokerage highlighted that there are no patient safety concerns, product recalls, or changes to existing regulatory approvals. Management expects the validation process to be completed by the end of Q2 FY27, with commercial dispatches expected to begin in Q3 FY27.
Long-term outlook unchanged
Despite the delay, Morgan Stanley said management continues to see strong demand for semaglutide and has reiterated its long-term strategy. The company is also making progress in securing alternate API sources, which should help support future commercial supplies.
Conclusion: Both HSBC and Morgan Stanley believe the semaglutide supply disruption is temporary and does not change Dr. Reddy’s long-term growth story. While the delay is expected to weigh on near-term sales and earnings, both brokerages remain confident in the strong demand for semaglutide, the company’s long-term strategy, and its ability to resume commercial supplies once the API-related issue is resolved.
About the Company
Dr. Reddy’s Laboratories is a prominent Indian multinational pharmaceutical company based in Hyderabad. Founded in 1984 by scientist and philanthropist Dr. Kallam Anji Reddy, the company produces a wide array of active pharmaceutical ingredients (APIs), generics, branded generics, and biosimilars worldwide.
Financial Highlights: The revenue from operations decreased by 12 percent to Rs 7,546 crore in Q4 FY26 from Rs 8,528 crore in Q4 FY25, and EBIDT decreased by 81 percent to Rs 382 crore in Q4 FY26 from Rs 1,998 crore in Q4 FY25. This was accompanied by a net profit decrease of 86 percent to Rs 221 crore in Q4 FY26 from Rs 1,587 crore in Q4 FY25, resulting in an EPS decrease of 86 percent to Rs 2.65 per share in Q4 FY26 from Rs 19.09 per share in Q4 FY25.
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