Shares of Dr. Reddy’s Laboratories Ltd. declined over 5% during Friday’s early trading session after the company announced its December quarter results. The Q3 earnings revealed subdued numbers and margins, reflecting the impact of heightened competition in the generics segment.

The drugmaker reported EBITDA margin of 27.5% for the quarter, which was lower than the CNBC-TV18 poll estimate of 28.1%. The miss in net profit was higher on account of lower other income.

Within segments, the US market remained flat year-on-year due to lower gRevlimid sales and market share loss in recently launched products. Meanwhile, the India business grew 14%, but after adjusting for the vaccine portfolio, the growth stood at 5%. Overall topline growth was supported by superior performance in both Europe and emerging markets (EM).

In an interaction with CNBC-TV18, Deven Choksey of DRChoksey Finserv mentioned that the key takeaway from the management commentary is the company’s focus on regular product launches while investing in biosimilars and other complex products, which form the cornerstone of its future growth strategy.

“Currently, the stock price factors in most of the positives, leaving limited upside. But as far as the growth prospects are concerned, the road is relatively more clearer than before,” Choksey added.

What analysts recommend

Global brokerage firm Citi has a ‘Sell‘ recommendation on Dr. Reddy’s Laboratories, with a price target of ₹1,100 per share. Citi said that Q3 performance was subdued and missed expectations as a decline in the US market was more pronouced.

Despite a slight consolidation in NRT, lower R&D spending, and a decline in baseline SG&A expenses that helped maintain EBITDA flat quarter-on-quarter, concerns about pricing pressure and lack of clarity on new launches persist.

Additionally, the anticipated launch of Iron Sucrose has been delayed, dampening near-term prospects.

HSBC has a ‘Hold‘ rating on Dr. Reddy’s Laboratories, with a price target of ₹1,250 per share.

HSBC believes the launch of Semaglutide in Canada (expected in early 2026) offers some relief, though this may not entirely offset the decline in gRevlimid sales.

The brokerage also said that the frowth from Semaglutide will likely be short-lived until long-term drivers scale up.

CLSA has an ‘Underperform‘ rating on DRL, with a price target of ₹1,120.

It pointed out flat US sales year-on-year but declined quarter-on-quarter due to lower sales in Revlimid in the quarter.

While the company expects to launch 15-20 products in the US over FY26-27, concerns about incremental pricing pressures in top US products remain significant. CLSA has slightly raised its revenue and margin estimates for FY25-27, driven by growth in the recently acquired NRT business.

Emkay Global retained its ‘Sell‘ rating with a price target of ₹1,150, citing multiple negatives.

These included the decline in US sales due to gRevlimid, management acknowledgment of pricing pressures, the receipt of a complete response letter (CRL) for Iron Sucrose, and limited visibility on the CY26 Semaglutide opportunity. Emkay also said that it has maintained its earnings estimates, which are lower than Street expectations.

In contrast, JM Financial maintained a ‘Buy‘ rating with a price target of ₹1,723, saying the stock remains attractive compared to large-cap peers.

The brokerage said that the management confidence in overcoming the gRevlimid slump after FY26, supported by opportunities in Semaglutide (Canada & RoW) and Abatacept starting January 2027. Margins are expected to remain at 25%, with flexibility in SG&A and R&D spending.

Out of the 40 analysts that have coverage on Dr. Reddy’s, 15 of them have a ‘Buy’ rating, while 15 of them have a ‘Sell’ call. The other 10 have a ‘Hold’ rating.

Shares of Dr. Reddy’s Laboratories are urrently trading 6.12% lower on Friday at ₹1,210.50. The stock has given negative returns so far this year, currently down 11%.