Dr Reddy’s June Profit Misses Estimates on Cost Surge

Dr Reddy’s Laboratories Ltd. reported a 2% on-year increase in consolidated net profit to ₹14.18 billion for the April–June quarter, missing the Street estimate of ₹15.5 billion. Sequentially, profit fell 11% due to higher costs outpacing revenue growth.

Revenue rose 11% on year to ₹85.72 billion, but remained flat on quarter and fell short of the projected ₹87.4 billion. Total expenses surged nearly 16% to ₹69.58 billion, led by a 70% jump in material costs to ₹20.36 billion. Employee and other expenses each rose over 6%.

R&D spending edged up 1% to ₹6.24 billion, and capital expenditure stood at ₹6.8 billion for the quarter.

Global generics revenue rose 10% to ₹75.62 billion. Sales in North America declined 11% to ₹34.12 billion, while domestic generics rose 11% to ₹14.71 billion. Revenue from emerging markets increased 18% to ₹14 billion. Sales in Europe surged 142% to ₹12.74 billion, largely due to the acquired nicotine replacement therapy (NRT) portfolio. Excluding NRT, Europe sales were up 15%.

The pharmaceutical services and active ingredients segment saw revenue rise 7% on year to ₹8.18 billion, but declined 14% sequentially on lower volumes and pricing.

EBITDA rose to ₹22.78 billion from ₹21.60 billion, though margin narrowed by 150 basis points to 26.7%. Gross margin fell to 56.9% from 60.4% a year ago.