1:5 Split, First In 25 Yrs: Rs 6,840 Pharma Major Dr Reddy's To Split Into 5 Shares; BUY For Rs 8,010 Target

Dr Reddy's Laboratories, is one of the hot pharma stocks that is going to split-up soon. This largecap giant has received board of directors approval for sub-division of its shares in the ratio of 1:5. It will be Dr Reddy's first stock split in 25 years. The pharma major also reported strong performance in Q1FY25. Following which, brokerages have recommended to buy or hold Dr Reddy's Lab stock. The highest target is of Rs 8,010 set by JM Financial.

JM Financial On Dr Reddy's Lab:

We believe there could be potential upside here. Additionally, gRevlimid sales estimates are likely to be underestimated as DRRD could have achieved at least USD 150 mn this quarter, reflecting a ~50% QoQ increase. Given this performance, Dr. Reddy's is expected to generate USD 650mn+ in free cash flow annually over the next three years, potentially raising its cash balance to over USD 1.5 bn by FY27. With a focus on earningsaccretive transaction (such as the recent NRT brands acquisition), we see positive potential for core earnings. At CMP, it trades at ~21-22x on FY27 EPS and remains attractive as compared to large-cap peers. Therefore, we maintain a BUY rating on the stock, valuing it based on core EPS and Rs 628 Revlimid NPV, with a target price of Rs 8,010.

ICICI Direct On Dr Reddy's Lab:

Our target price is ₹ 7220 based on 23x FY26E EPS of 310.3 plus NPV of ₹ 86 for gRevlimid. We maintain HOLD rating as we continue to monitor progress on the launches and R&D front.

Overall, we believe DRL's capability of complex launches on a consistent basis across geographies to be the key determinant for overall performance. Recent acquisition of Nicotine Replacement Therapy brands, launch drug-free migraine device in Europe and JV with Nestle for nutraceuticals are some unique deals the success of which would be keenly watched for.