Nomura maintains 'Buy' on Dr Reddy's, sees 30% earnings upside from potential abatacept approval

Its sales, EBITDA and profit-after-tax estimates are 1.4%, 23.1% and 20.7% above consensus, respectively. Nomura expects the quarter to be the third without a material contribution from gRevlimid. It expects North America generics (NAG) sales to improve sequentially on a relatively low base, supported by launches of generic Bosulif and Sugammadex. Dr Reddy's has gained 71% market share in the 400mg generic Bosulif segment as of August 2026, according to IQVIA, while its market share in generic Sugammadex stood at 16%.

The brokerage expects the company to sustain mid-teen growth in India after recording 13.7% year-on-year growth in the Indian Pharma Market for the quarter ended September 2026, according to Pharmarack. Growth in Russia is likely to remain strong, supported by favourable currency movements, while constant-currency growth is expected to remain in the mid-single digits. Semaglutide, abatacept key catalysts

Nomura said management's commentary on resumption of commercial supplies of semaglutide will be closely monitored. The company has indicated that the project to address the impurity in the scale-up batch is on track and that commercial supplies are expected to commence in November 2026. Management has guided for sales of 6-7 million pens in the second half of FY27, which Nomura expects to generate more than $100 million in revenue.

The brokerage also expects the market to monitor the potential USFDA approval of biosimilar abatacept intravenous formulation, with a target action date of December 18, 2026. "We expect the approval and launch of biosimilar abatacept will be a significant positive catalyst for the stock," Nomura said. It added that approval and launch, if materialised, could positively impact FY28 and FY29 earnings by approximately 30%, with the upside potentially sustained due to limited competition.

Nomura's target price of Rs 1,740 is based on 24 times one-year forward earnings per share of Rs 72.6. The stock closed at Rs 1,245 on October 21 and trades at 18 times and 15 times FY28 and FY29 estimated earnings per share of Rs 69 and Rs 82, respectively.