Dr. Reddy's Laboratories Limited (Dr. Reddy) recorded a significant y-o-y increase in revenues in 1Q 10, primarily due to strong revenue growth of the Global Generic segment, particularly due to higher sales of sumatriptan in North America. Although 1Q 10 performance was below our expectations and loss of revenues from sumatriptan will impact future performance; the strategic tieup with GloxoSmithkline Inc. (Glaxo) to sell generics is expected to prove beneficial over the long term. Hence, although the common stock target price does not support our HOLD rating at current price levels, we maintain our HOLD rating. We will reassess our target price and rating in our 1Q 10 update report. Although the ADR target price no longer supports our BUY rating at current price levels; based on our fundamental outlook and anticipation of significant positive currency impact on the ADR over our investment horizon, we maintain our BUY rating for the ADR. We will reassess our target price and rating in our 1Q 10 update report.

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