Goldman Sachs turns cautious, trims outlook sharply
The brokerage downgraded the stock to “Sell” and sharply cut its target price to Rs 1,075 from Rs 1,225, signalling potential downside from current levels.
A key overhang is the much-anticipated opportunity linked to Ozempic, which Goldman Sachs now believes could be smaller in scale and shorter-lived than previously expected. This has raised questions about the company’s near-term growth triggers.
Adding to the pressure, the firm highlighted limited visibility in Dr Reddy’s pipeline, noting a lack of significant high-value launches that could drive earnings momentum. Meanwhile, ongoing price erosion in its core generics business continues to dent profitability.
Reflecting these challenges, Goldman Sachs has cut earnings per share (EPS) estimates by 8-26% for FY26-FY28, indicating a weaker earnings trajectory ahead.The brokerage also flagged valuation concerns, arguing that the stock’s current multiples are ahead of underlying fundamentals. It now values Dr Reddy’s at around 19x P/E, warning of further downside risk if growth fails to materialise.
Citi remains bearish despite approval optimism
Citigroup also maintained its “Sell” rating on the stock with a target price of Rs 1,070, reinforcing a cautious consensus among global brokerages.
While Dr Reddy’s shares had earlier gained nearly 9% on reports of an unverified generic semaglutide approval in Canada, Citi downplayed the excitement, arguing that even if confirmed, the upside appears overstated given intense competition.
The brokerage estimates FY28 product revenues of around $50 million in a six-player market, while revising FY27 revenue expectations to $80-100 million (up from ~$60 million earlier) in a three-player competitive set including Dr Reddy’s, Sandoz and Apotex.
Citi also expects fourth-quarter FY26 earnings to normalise on a base excluding Revlimid contributions and warned that broader market earnings estimates may need to be revised downward. Its EPS forecasts are already 20%-23% below consensus, underscoring a more conservative stance on earnings growth.
Sentiment turns cautious
With both Goldman Sachs and Citi flagging limited earnings visibility, pipeline uncertainty and stretched valuations, sentiment around Dr Reddy’s has turned notably cautious, despite intermittent optimism around niche product approvals.
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
