2 Pharma stocks in focus after Q2 results; Are you holding any?

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2 Pharma stocks in focus after Q2 results; Are you holding any?

India’s pharmaceutical industry is one of the largest and most dynamic in the world, known for its robust manufacturing capabilities and affordable generic drugs. The country supplies over 50% of the global demand for vaccines and around 40% of generic medicines in the U.S. To further strengthen its position, the Indian government has been actively providing incentives for research, development, and manufacturing.

With investments in infrastructure, technology, and regulatory reforms, the government aims to make India a global hub for high-quality, cost-effective pharmaceutical products, driving both domestic and international growth.

1. Dr. Reddy Laboratories Limited

Dr. Reddy’s Laboratories Ltd., a global pharmaceutical company based in Hyderabad, India, specializes in producing and marketing generic and branded pharmaceuticals, as well as active pharmaceutical ingredients (APIs) across various therapeutic areas including oncology, gastroenterology, and dermatology.

In its latest earnings report, Dr. Reddy’s Laboratories reported a 16% year-over-year revenue growth in Q2FY25, reaching ₹8038.2 crore, driven by its Generics segment.

The operating profit margin declined from 29% to 26% (YoY) for the quarter, while Research and Development expenses accounted for 9.1% of revenues. Despite revenue improvement, the profit after tax declined by 9.5% year-over-year from Rs 1,482 crore in September 2023 to Rs. 1,342 crore.

The company also highlighted strategic developments such as the acquisition of a nicotine replacement therapy portfolio and a joint venture with Nestle for nutraceuticals. It also announced an investment of ₹600 crores into its Russian subsidiary and a strategic partnership with Nestle for nutraceutical products.

Brokerage Recommendation

According to Jefferies, the stock won’t have any near-term catalyst primarily because of limited product launches in the US, and elevated selling, general, and administrative (SG&A) costs.

Citi maintains a ‘Sell’ rating on Dr Reddy’s Labs but raises its price target to ₹1,110 from ₹1,106 per share earlier. Citi noted that in Q2, non-US markets offset weaker performance in the US, while gRevlimid continues to contribute meaningfully.