Highlights

  • HSBC raises FY27 and FY28 EPS forecasts by 12–13% due to semaglutide sales
  • Semaglutide projected to contribute USD 280 million in revenue by FY27
  • FY26 EPS cut by 5.1% as generic Revlimid revenues decline

HSBC has upgraded Dr Reddy’s Laboratories (NYSE:RDY) American Depositary Receipts (ADRs) from Hold to Buy, lifting its price target from USD 14.44 to USD 16.90. The move follows a revised outlook that anticipates a revenue boost from semaglutide, a generic alternative to Novo Nordisk’s high-demand weight-loss and diabetes drug.

According to HSBC’s estimates, semaglutide could generate USD 280 million in revenues for Dr Reddy’s by fiscal 2027, representing approximately 18% of its earnings per share. The bulk of these revenues are expected to be driven by early market entry in Canada, with additional launches projected in Brazil and India following local patent expirations in March 2026.

Dr Reddy’s is navigating a transition away from dependence on generic Revlimid, whose earnings contribution is expected to drop sharply after January 2026. HSBC has adjusted its earnings estimates accordingly, reducing the FY26 EPS forecast by 5.1% due to the anticipated revenue gap, but increasing FY27 and FY28 estimates by 12–13% based on potential semaglutide sales.

While a court order in India temporarily restricts semaglutide exports, HSBC expects the company to be among the first to launch the drug in several non-U.S. markets, capitalizing on tight global supply and strong demand. The constrained supply environment may help limit the typical price erosion seen with generic drugs, improving profitability prospects.

In a more optimistic scenario, HSBC projects semaglutide sales could reach USD 500 million, further enhancing the company’s earnings trajectory. The brokerage has revised its launch assumptions to reflect an earlier, broader rollout beginning in early FY27, instead of a limited Canada-only release in late FY26.

The revised outlook indicates a shift in investor focus from short-term revenue loss to medium-term growth opportunities driven by high-demand generic drugs and diversification into consumer health and biologics.