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On Thursday, HSBC analysts upgraded Dr. Reddy’s Laboratories (NYSE:RDY) stock rating to Buy from Hold. The analysts set a new price target of INR1,445, up from INR1,235, reflecting a positive outlook on the company’s market dynamics and future earnings potential.
HSBC’s revised estimates for fiscal years 2026 to 2028 consider the evolving market conditions for semaglutide and gRevlimid. The analysts now anticipate the launch of semaglutide in early fiscal year 2027 in Canada, Brazil, and India, an expansion from their previous assumption of a launch solely in Canada by the fourth quarter of fiscal year 2026.
The analysts adjusted their sales forecasts for gRevlimid for fiscal year 2026, attributing the change to increasing competition. This adjustment led to a 5.1% reduction in the earnings per share (EPS) estimate for fiscal year 2026. However, the EPS estimates for fiscal years 2027 and 2028 increased by 12-13%.
HSBC’s valuation approach now separates the base business EPS, excluding semaglutide, with a target price-to-earnings (PE) multiple of 25x, while semaglutide is valued at 20x. This new valuation method supports their sum-of-parts analysis, resulting in the revised price target.
The analysts believe the anticipated boost in semaglutide sales will positively impact Dr. Reddy’s earnings trajectory. They have also set a new target price for the company’s American Depositary Receipts (ADR) at $16.90, up from $14.44.
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