Dr. Reddy's Laboratories Limited

Consolidated revenue was INR 8,071 crores ($853 million), down 5.6% year over year and up 7.4% sequentially. Consolidated gross profit margin was 46.5%, down 1,039 bps year over year and up 169 bps sequentially; excluding the semaglutide API-related provision, overall margin was 49.4%. Underlying EBITDA, including other income, was INR 1,009 crores ($107 million), with a margin of 12.5%; excluding the semaglutide provision, EBITDA margin would have been 15.4%. PBT was INR 553 crores ($58 million), PAT attributable to equity holders was INR 443 crores ($47 million), and diluted EPS was INR 5.32. Operating working capital was INR 14,353 crores ($1.52 billion), capex cash outflow was INR 307 crores ($32 million), quarterly cash flow before acquisition-related payout was negative INR 216 crores ($23 million), and net cash surplus was INR 3,057 crores ($323 million). For the full year, management said CapEx should be around INR 1,800 crores, R&D should be in the 7% to 8% range, and tax rate should be around 24% to 25%. Erez Israeli said the company is aiming to be in the neighborhood of 20% EBITDA margin and expects semaglutide supplies to resume in November.

Erez Israeli emphasized that the company remains focused on disciplined execution, strengthening the base business, and building future growth engines in peptides, biosimilars, consumer health, and innovation. He repeatedly framed the quarter’s weakness as temporary and tied mainly to semaglutide manufacturing issues, while saying the underlying business continued to grow double digits and that a strong second half is expected once supplies resume. His tone was confident and constructive, with a clear message that the company still sees double-digit base business growth and steady margin improvement ahead.

M. V. Narasimham said Q1 revenue of INR 8,071 crores declined 5.6% year over year mainly because of lower lenalidomide and an INR 240 crore semaglutide-related provision. He detailed margin pressure from lower lenalidomide, the semaglutide provision, and higher solvent costs tied to the Middle East conflict, while noting that excluding the provision overall margin would have been 49.4% and EBITDA margin 15.4%. He also cited SG&A of INR 2,082 crores, R&D of INR 577 crores, net cash surplus of INR 3,057 crores, and said full-year CapEx is expected to be around INR 1,800 crores, with tax rate around 24% to 25% and R&D at 7% to 8%.

Analysts focused heavily on semaglutide disruptions, margin recovery, abatacept approval timing, and U.S. generics growth. Management said the semaglutide root cause has been identified, the success rate of the remediation plan is high, and supplies could resume in November, with 6 to 7 million pens expected between November and March; they also said the lost opportunity from the API issue was about 3 million to 4 million pens. On abatacept, management said the FDA inspection observations were addressable, the BLA has not yet received substantive queries, and the goal date remains December. Analysts also pressed on U.S. growth and R&D productivity; management answered that U.S. generics are structurally low-growth and that prior R&D missteps have been corrected, while targeting 27 launches in the U.S. this year.