Brokerages remain divided on Dr Reddy's Laboratories following the semaglutide supply disruption, with ratings ranging from 'Buy' to 'Reduce' despite the temporary halt in commercial supplies. BofA maintained its 'Buy' rating with a target price of ₹1,570, believing the stock is pricing in a four-to-five-month disruption and viewing an earlier resolution as a key upside trigger. Morgan Stanley retained its 'Equal-weight' rating with a target price of ₹1,215, describing the issue as a temporary delay and building in $130 million in Canada revenue for FY27. However, Kotak Securities maintained its 'Reduce' rating while cutting its target price to ₹1,160 from ₹1,175, calling the development "another dose of disappointment" and estimating semaglutide Canada sales at $56 million and $38 million in FY27 and FY28 respectively. Jefferies reiterated its 'Underperform' rating with a target price of ₹1,040, noting that scale-up issues have pushed semaglutide commercialisation to October-November and revised FY27 supply guidance to 6-7 million pens from an earlier expectation of 10-12 million. Emkay Global Financial has now joined the 'Reduce' camp with a target price of ₹1,300, citing three key risks: resumption and scale-up delays, market deterioration by the time Dr Reddy's enters, and uncertainty around partner-driven volumes. Motilal Oswal has now joined the 'Neutral' camp with a target price of ₹1,210, factoring in the slower semaglutide ramp-up and cutting FY27/FY28 earnings estimates by 11%/2% respectively.
Dr Reddy's shares tumbled another 4% on Friday, extending their decline to more than 9% over two days after the company announced the semaglutide supply disruption. The stock fell to ₹1,222 apiece, its lowest level in nearly three months, wiping out more than ₹10,600 crore in market capitalisation over two sessions and taking its market value below ₹1.02 lakh crore. The recent decline has added to the stock's weak performance over the past week, with Dr Reddy's shares falling more than 9.5% during the period, including the declines over the last two sessions. Over the past year, the stock has declined more than 1.5%, while the benchmark Nifty 50 has fallen more than 4.6%. The market decline reflects investor concerns about the extended timeline for semaglutide commercialization and potential impact on near-term revenue expectations. The setback will directly affect sales of semaglutide pens, with earlier expectations having assumed supplies through July, August, September and October.
Dr Reddy's Laboratories has temporarily halted commercial supplies of its generic semaglutide injection after certain validation batches failed quality specifications. In an exchange filing dated July 9, 2026, Dr Reddy's stated that "certain batches of semaglutide were found to be out of specification due to issues associated with the API used in the product." The company is investigating the root cause and taking appropriate measures to ensure product quality, with the issue relating to pre-validation batches and having no impact on the existing marketed product or any recall risk. The company now needs to tweak process parameters and repeat three validation batches before resuming commercial production. Based on current timelines, validation work is expected to be completed by the end of September, with commercial API supplies reaching partner facilities in October and market supplies resuming "late October, early November." CEO Erez Israeli described the situation as "a delay of few months," while cautioning that there remains some execution risk. Motilal Oswal notes that the estimated timeline for approval from Canada Health and the subsequent product launch was delayed by 5-6 months, with the current manufacturing issue expected to further extend the benefit to be derived from this product.
Commercial supplies are now expected from November onwards, with FY27 supply guidance revised to 6-7 million pens from an earlier expectation of around 12 million pens. The company maintained its broader financial guidance, reiterating its expectation of around a 20% EBITDA margin and stating that there is no change to its overall business outlook. Inventory in the Canadian market remains unaffected, with the impact limited to the inability to supply during the delay period. The slowdown in semaglutide scale-up is likely to weigh on earnings, with analysts noting that a prolonged delay could allow competitors to gain ground, weaken pricing power and slow earnings growth. While the company remains committed to its existing sourcing relationship while building its own manufacturing capacity for semaglutide and other products, the revised guidance reflects the extended timeline for commercialization. Emkay Global Financial notes that the revised guidance of 6-7 million pens in 2HFY27 implies FY27 volumes closer to 8 million versus guidance of ~10-12 million pens earlier, with the firm's prior FY27 margin assumptions now appearing out of reach. Motilal Oswal expects earnings to remain under pressure in FY27 amid lower g-Revlimid contribution and delayed semaglutide supplies, but expects recovery from FY28 onwards, driven by normalization in semaglutide sales, improving base business growth, and potential Abatacept approval.
Despite the supply disruption, several brokerages maintained their positive long-term outlook on Dr Reddy's, with JM Financial maintaining its 'Buy' rating but reducing its target price to ₹1,561 from ₹1,596, implying an upside potential of nearly 23%. JM Financial believes the stock is attractive at its current valuation, citing upcoming growth catalysts such as the Abatacept opportunity in FY28. The brokerage's revised estimates project an EBITDA margin for FY27 at 21%, representing a decline from the 22% EBITDA margin reported in FY26. Jefferies reiterated its 'Underperform' rating with a target price of ₹1,040, noting that scale-up issues have pushed semaglutide commercialisation to October-November and revised FY27 supply guidance to 6-7 million pens from an earlier expectation of 10-12 million. The domestic brokerage slashed its revenue, EBITDA and profit after tax estimates for FY27 by 7%, 16% and 18% respectively, but remains optimistic about the company's ability to ramp up operations to previously guided levels by FY28. JM Financial noted that the Abatacept opportunity in FY28 should drive EPS to ₹78, with the stock currently trading at 16x FY28 earnings viewed as attractive given upcoming growth catalysts. JM Financial emphasized that global demand for semaglutide remains exceptionally strong, exceeding current manufacturing capacity, with the market capable of absorbing production of up to 15 million pens.
