On Thursday, CLSA analysts downgraded Dr. Reddy's Laboratories shares, trading on both BSE (DRRD:IN) and NYSE (NYSE:RDY), from a Hold to an Underperform rating, adjusting the price target from INR1,140 to INR1,090. The revision reflects a forward-looking valuation to December 2026, resulting in a lowered target price.
The downgrade comes amid concerns over the lack of immediate growth catalysts for the pharmaceutical company. CLSA pointed to several factors contributing to the negative outlook. The firm noted that Dr. Reddy's near-to-mid-term revenue triggers appear limited, with its Nicotine Replacement Therapy (NRT) portfolio expected to contribute to revenue only after two years. Additionally, any potential launches in the Biosimilar segment are projected to commence after three years.
The analysts also highlighted the absence of a robust product pipeline that could mitigate the impact of the generic version of Revlimid's patent expiry. The generic version, known as gRevlimid, has been a significant product for Dr. Reddy's, and its patent expiry is expected to affect the company's financials negatively.
In their commentary, CLSA analysts stated, "We roll forward our valuation to Dec 26CL and, as a result, lower our target price from Rs1,140 to Rs1,090. With a total return of -13%, we downgrade our rating from Hold to Underperform as there are no triggers over the mid-term."
Investors and stakeholders of Dr. Reddy's Laboratories are now faced with a more cautious outlook from CLSA, as the firm adjusts its expectations for the company's stock performance over the coming years. The lowered price target and rating downgrade underscore the challenges ahead for Dr. Reddy's in maintaining growth and offsetting upcoming patent expirations.
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