Dr. Reddy’s Laboratories (DRREDDY) Q1 25/26 earnings summary

Executive summary

• Q1 FY26 delivered 11% year-over-year revenue growth to INR 8,545 crore (₹85.5 billion), with consolidated revenues flat sequentially and strong contributions from branded markets and the acquired NRT portfolio.

• EBITDA margin reached 26.7%, exceeding the 25% target, with EBITDA at INR 2,278 crore (₹22.8 billion), up 5% year-over-year but down 8% sequentially.

• Net cash surplus at quarter-end was INR 2,922 crore (₹29.2 billion/$341 million), reflecting a strong balance sheet.

• Strategic focus remains on pipeline advancement (notably semaglutide and abatacept), cost optimization, and expanding in consumer health, innovative therapies, and biosimilars.

• Collaborations with Alvotech for pembrolizumab and completed NRT integration in Nordics supported growth.

Financial highlights

• Gross margin was 56.9%, down 350 bps year-over-year but up 134 bps sequentially, mainly due to price erosion in generics and lower operating leverage.

• SG&A expenses rose 13% year-over-year to INR 2,565 crore (₹25.6 billion), driven by investments in consumer health and the Nestlé JV.

• R&D spend was INR 624 crore (₹6.2 billion), 7.3% of sales, flat year-over-year and down 14% sequentially.

• Profit after tax attributable to equity holders was INR 1,419 crore (₹14.2 billion), up 2% year-over-year and down 11% sequentially.

• Free cash flow for the quarter was INR 433 crore (₹4.5 billion), with net finance income at ₹1.6 billion.

Outlook and guidance

• Normalized effective tax rate expected to remain around 25% for the full fiscal year.

• R&D investments projected at 7%-7.5% of sales for the full year.

• U.S. base business expected to be flat to single-digit growth, with recovery dependent on new launches.

• Semaglutide approval and launch in Canada targeted for early 2026, with broader launches in 87 markets post-March 2026.

• Focus on strengthening core businesses, innovation, operational efficiency, and ESG integration.