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Strong Growth Visibility Backed by Semaglutide and Biosimilar Scale-up

Despite headwinds in Q4FY26, we maintain a positive view on the company as the majority of the impact was one-off in nature. We expect growth to be driven by Semaglutide launch in India, Canada and Brazil (expected in FY27E), with limited competition from Indian players in Canada. Additionally, planned biosimilar launches along with innovative product launches in India should support margin expansion. Factoring in the one-offs, we revise FY27/28E estimate downwards by 12.5%/10.4%. However, given the company’s evolving portfolio mix towards complex generics, biosimilars and innovative products in India, we raise our target multiple by 10%. Our revised TP stands at INR 1,335 with an ADD rating. This implies a PEG of 0.7x, reinforcing the attractiveness of valuation.

Weak Quarter Impacted by One-offs

* Revenue de-grew 11.5% YoY / 13.8% QoQ to INR 75,464 Mn (vs. CIE estimate: INR 87,072 Mn).

* EBITDA declined 69.2% YoY / 66.6% QoQ to INR 6,400 Mn (vs. CIE estimate: INR 20,968 Mn); margin contracted 1,585 bps YoY / 1,339 bps QoQ to 8.5% (vs. CIE estimate: 24.1%).

* PAT decreased 86.1% YoY / 81.7% QoQ to INR 2,209 Mn (vs. CIE estimate: INR 14,116 Mn).

* The results include the adverse impact of a Shelf-Stock Adjustment related to Lenalidomide of INR 4,530 Mn, impairment of CAR-T assets and Eftilagimod Alfa of a total of INR 2,277 Mn, provisions related to VAT liability of INR 1,141 Mn in Q4FY26.

* Q4 Adjusted Numbers: Adj Revenue came in at INR 79,690 Mn; Adj EBITDA stood at 10,786 Mn with EBITDA Margin of 13.5%; Adj PAT at INR 9,940 Mn.

Q4 Impacted by One-offs; FY27 Expected to be Driven by Mix and Scale-up

DRRD reported a weak Q4FY26 impacted by multiple one-offs, including shelfstock adjustments for gRevlimid, VAT provisions and impairment related to CART R&D following a strategic exit from the investment. However, we believe the long-term growth story remains intact, supported by Semaglutide launch in India and Canada, with Brazil anticipated in H2FY27E. We project limited competition from Indian players in Canada in FY27E, while in India the company is well-positioned to emerge as a leading player in the premium segment, having already captured 10%+ market share. Additionally, biosimilars, such as Denosumab and Abatacept should act as medium-term growth drivers. Overall, we expect revenue growth of 15-16% in FY27E.

Temporary Margin Disruption; Recovery Ahead in FY27

Margin, similar to revenue, saw a sharp contraction in Q4FY26; however, given the largely one-off nature of these impacts, we expect normalisation in FY27E. Additionally, scale-up of new launches including Semaglutide, biosimilars and other innovative products should further support margin expansion.

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