Dr. Reddy’s Laboratories (DRREDDY) Q3 25/26 earnings summary

Executive summary

• Q3 FY26 revenue grew 4.4% year-over-year to ₹87.3 billion, with double-digit growth in the base business and broad-based gains across India, Europe, and Emerging Markets, but North America declined due to lower Lenalidomide sales and price erosion.

• EBITDA margin was 23.5%, impacted by a one-time provision for new labor codes; adjusted margin was 24.8%.

• Profit after tax for Q3 FY26 was ₹12.1 billion, down 14% year-over-year.

• Net cash surplus at quarter-end was ₹30.7 billion, and annualized ROCE was 20.4%.

• Strategic collaborations, new product launches, and ESG initiatives, including Net Zero Climate Targets, supported business momentum.

Financial highlights

• Consolidated revenues were ₹87.3 billion, up 4.4% year-over-year, down 0.9% sequentially.

• Gross profit margin was 53.6%, down 505 bps year-over-year, mainly due to lower Lenalidomide sales and adverse product mix.

• SG&A spend rose 12% year-over-year to ₹26.9 billion, about 31% of revenue, driven by investments in branded franchises and labor code provision.

• R&D spend was ₹6.1 billion, 7% of revenue, down 8% year-over-year.

• EBITDA was ₹20.5 billion (23.5% margin), down 11% year-over-year.

• Profit after tax attributable to equity holders was ₹12.1 billion, down 14% year-over-year.

• Diluted EPS for the quarter was ₹14.52.

• Free cash flow generated was ₹3.7 billion.

Outlook and guidance

• India business growth of 15%-16% is considered sustainable, with potential upside from new launches and acquisitions.

• SG&A growth is expected to moderate, with cost containment measures in place.

• R&D spend guidance remains at 7%-8% of revenue, with ongoing investments in new molecules.

• Focus on strengthening core businesses, advancing pipeline products, operational efficiencies, and select M&A.

• Gross margin for global generics and PSAI expected in the 50%-55% range from Q4 onwards, post-Revlimid.