Dr Reddy’s: JM Financial decodes the semaglutide supply delay and the hidden catalyst set to drive the stock higher

JM Financial keeps Dr Reddy’s at Buy despite semaglutide delay, seeing 23% upside and an FY28 Abatacept catalyst—track the stock.

Written by Sparsh Bansal

July 10, 2026 14:29 IST

Close-up of a modern corporate biotechnology research screen mapping out localized manufacturing compliance data. Interactive panels track the progress of three upcoming fresh validation batches alongside long-term strategic EPS forecasts pointing toward Rs 78 driven by the Abatacept opportunity.

Out-of-specification validation impurities trigger a near-term profit cut. (Image: Reuters)

JM Financial maintained a ‘Buy’ recommendation on Dr Reddy’s Lab, with a revised target price of Rs 1,561, down 2.2% from the previous target of Rs 1,596. The new price target still sees an upside of 23% from the current market price. The brokerage believes that the stock is attractive at its current valuation, citing upcoming growth catalysts such as the Abatacept opportunity in FY28.

Semaglutide supply disruption

Dr Reddy’s has announced a delay in the commercial supply of semaglutide because certain validation batches of the active pharmaceutical ingredient (API) were found to be out of specification. This issue occurred during the scale-up process and is considered a manufacturing validation issue rather than a failure in product design.

JM Financial’s revised estimates, the EBITDA margin for FY27 is projected at 21%. This represents a decline from the 22% EBITDA margin reported in FY26.

Revised commercialisation timeline

The company’s management expects to complete three fresh validation batches by September 2026. Commercial API shipments to their partner, OneSource, are anticipated to begin in October 2026, with finished-product market supplies expected in late October or early November 2026.

Impact on financial estimates

Due to the three-month delay in commercialisation, JM Financial has reduced its revenue, EBITDA, and net profit estimated for FY27 by 7%, 16%, and 18%, respectively. However, the brokerage believes the disruption’s impact is limited to FY27 and expects the company to ramp up operations to previously guided levels by FY28.

Strong global demand

Despite the manufacturing delay, management emphasised that global demand for semaglutide remains exceptionally strong, exceeding current manufacturing capacity. The market is reportedly capable of absorbing production of up to 15 million pens, and competitive launches are not expected to significantly impact near-term demand.

Abatacept opportunity

The Abatacept opportunity is identified as a major growth catalyst for the company in the 2028 fiscal year. It is a key factor in JM Financial’s projection that the company’s Diluted Earnings Per Share (EPS) will reach Rs 78 in FY28.

Dr Reddy’s share price performance

The share price of Dr Reddy’s Lab has fallen 10% in the last five trading days. The stock has declined 2% in the last one month. However, the stock has surged 2.5% in the past six months. It has dropped 1.3% over the last 12 months.

This article was first uploaded on July ten, twenty twenty-six, at twenty-nine minutes past two in the afternoon.