Dr. Reddy’s downgraded to Underperform from Buy at Jefferies

Jefferies analyst Alok Dalal downgraded Dr. Reddy’s to Underperform from Buy with a price target of INR 5,040, down from INR 6,250. The firm cut FY25-26 EPS estimates by 3%-7% for Dr. Reddy’s, mainly from lower U.S. sales and weak traction in India. The implied FY26 EV/EBITDA valuation for core U.S. generic businesses stands at an elevated 17-20x for Dr Reddy’s, Lupin and Zydus, which “can only be justified through big ticket launches,” but the end market opportunity is shrinking with increasing R&D investment towards biotech drugs by innovators and Indian companies largely focused on chemical drugs, the analyst tells investors.