Dr. Reddy Laboratories Limited (Dr. Reddy) recorded a significant y-o-y increase in revenues in 2Q 10, primarily due to strong revenue growth in the Global Generic segment. Although 1Q 10 performance was higher than expectations, loss of revenues from sumatriptan will hurt in the medium term. The strategic tie-up with global behemoth GlaxoSmithKline Inc. (Glaxo) to sell generics is expected to prove beneficial in the long term. Although the stock no longer supports our HOLD rating we reiterate our HOLD rating due to better-than-expected results. We will reassess the common stock rating for Dr. Reddy in our next update report. Although the current ADR price no longer supports our BUY rating, based on our fundamental outlook and anticipation of a significant positive currency impact on the ADR over our investment horizon, we reiterate our BUY rating for the ADR. We will reassess the ADR rating for Dr. Reddy in our next update report.

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