Dr Reddy's Q1 Profit Slump Masks a Sequential Recovery
Revenue dipped 5.5% year-on-year, but profit fell sharply by 69.1% as net margins compressed from 16.4% to 5.4%.
Dr Reddy's Laboratories reported a sharp 69% drop in quarterly profit year-on-year, with revenue also declining. However, results showed a strong sequential improvement from the previous quarter.
Dr Reddy's Laboratories posted a mixed set of earnings for the quarter ended June 2026. While revenue showed a modest sequential recovery, profitability remained under severe pressure compared to the same period last year, leading to a sharp year-on-year decline in profit.
The company's revenue for Q1 FY27 came in at ₹8,099.8 crore, marking a 5.5% decrease from Q1 FY26. However, profit after tax fell much more sharply, dropping 69.1% to ₹435.6 crore. This divergence highlights significant margin compression, with the net profit margin shrinking to 5.4% from 16.4% a year ago—a decline of 1,100 basis points. The silver lining is a strong quarter-on-quarter rebound; revenue grew 7.3% and profit nearly doubled, rising 96.8% from a low base in Q4 FY26.
A look at the recent quarterly trajectory shows the volatility in earnings.
Revenue (₹ crore)
Profit (₹ crore)
Net Profit Margin (%)
| Metric | CurrentQ1 FY27 | PreviousQ4 FY26 | Same quarter LYQ1 FY26 |
|---|---|---|---|
| Period Ended | June 2026 | March 2026 | June 2025 |
| Revenue (₹ crore) | 8,099.8YoY -5.5% | 7,546.4 | 8,572.1 |
| Profit (₹ crore) | 435.6YoY -69% | 221.3 | 1,409.9 |
| Net Profit Margin (%) | 5.4YoY -67% | 2.9 | 16.4 |
Key Points
- The trailing twelve-month (TTM) net profit margin stands at 9.6%, indicating the recent quarters have pulled the average profitability down from historical levels.
- The company maintains a robust balance sheet with a low debt-to-equity ratio of 0.2 and a healthy interest coverage ratio of 15.43.
- Despite the earnings pressure, the stock trades at a price-to-earnings (P/E) ratio of 25.0, which is at a significant discount to the industry average P/E of 38.0.
The immediate challenge for Dr Reddy's is to stabilise its net profit margin back towards its TTM average and beyond, reversing the steep decline seen over the past year.
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