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Dr. Reddy's pins hopes on a diabetes treatment drug, but analysts remains cautiousThe sharp 250 basis points quarter-on-quarter decline in gross margin (the third consecutive sequential fall) reinforces concerns brokerage firm Emkay Global has flagged since Q2FY25 about a potentially secular downward trend in margins.By Meghna Sen   May 12, 2025, 8:54:57 AM IST (Published)2 Min ReadShares of Hyderabad-based drugmaker Dr. Reddy's Laboratories Ltd. will react to their March-quarter (Q4FY25) results on Monday, May 12, after margin performance surprised negatively, with EBITDA missing Street estimates by 10%. The miss was offset to some extent by higher other income and a lower tax rate.

Emkay Global has retained a 'Reduce' rating with an unchanged price target of ₹1,050.

The sharp 250 basis points quarter-on-quarter decline in gross margin (the third consecutive sequential fall) reinforces concerns Emkay has flagged since Q2FY25 about a potentially secular downward trend in margins.

While the Q4 gross margin decline was partly due to one-off factors, Emkay believes underlying weakness is also linked to rising pricing pressures in the core US portfolio, especially for gSuboxone, the largest contributor excluding gRevlimid.

Despite management's guidance of double-digit topline growth and stable margins for FY26, Emkay suggests the Street may need to recalibrate its near-term margin expectations.

Goldman Sachs has a 'Neutral' rating on Dr. Reddy's, with a price target of ₹1,200 per share.

The foreign brokerage mentioned that EBITDA margin declined to 24% due to gross margin pressure and higher SG&A expenses.

Goldman Sachs' earnings per share (EPS) estimates for FY26–28 have been raised by up to 4%.

JP Morgan has an 'Underweight' rating with a price target of ₹1,060.

The brokerage said Q4 revenue was in line, but EBITDA missed expectations. It cited weak core EBITDA margin, slow India growth, and limited visibility on upcoming US launches.

JP Morgan acknowledged the potential of semaglutide but warned of increasing competitive pressures.

Citi has a 'Sell' rating, with a price target of ₹1,110.

According to Citi, gross margin continues to trend down and it expects the next quarter to benefit from peak gRevlimid volumes. While long-term drivers like GLP-1 and biosimilars are promising, Citi views FY26 guidance as challenging.

Nomura, in contrast, has a 'Buy' rating with a target price of ₹1,575.

It said Q4 performance exceeded forecasts, with sales, EBITDA, and profit beating estimates by 4%, 12%, and 33%, respectively. Earnings benefited from higher other operating income, and sales in North America, Europe, and Russia surpassed expectations.

Management expects double-digit revenue growth in FY26, with EBITDA margin guidance at 25%.

Shares of Dr Reddy's Laboratories Ltd. settled 0.88% higher on Friday at ₹1,158.10. The stock has declined over 15% so far this year.Continue ReadingNote To ReadersDisclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!TagsDr Reddy's LaboratoriesDr Reddy's Labsearnings