Dr. Reddy's Laboratories Ltd. (DRREDDY) AI Stock Analysis

• Market Cap: ₹1.02T
• Dividend Yield: 0.63%
• Average Volume (3M): 225.11K
• Price to Earnings (P/E): 17.8
• Beta (1Y): 0.78
• Revenue Growth: 14.10%
• EPS Growth: 9.72%
• Country: IN
• Employees: 27,048
• Sector: Healthcare
• Sector Strength: 45
• Industry: Drug Manufacturers - Specialty & Generic
• EPS (TTM): 14.52
• Shares Outstanding: 834,591,300
• 10 Day Avg. Volume: 499,682
• 30 Day Avg. Volume: 225,111
• PEG Ratio: 11.98
• Price to Book (P/B): 2.88
• Price to Sales (P/S): 2.95
• P/FCF Ratio: 50.79
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: ₹1,425.00
• Price Target Upside: 11.29% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 70 Outperform
• Price Target: ₹1,359.00 ▲(6.14% Upside)

The score is driven primarily by strong profitability and a conservative balance sheet, tempered by weaker cash conversion. The earnings call was constructive on guidance and pipeline progress, but near-term headwinds (post-Lenalidomide margin pressure and U.S. regulatory uncertainty) keep the score from being higher, while technicals are mixed and valuation is only moderately supportive.

Positive Factors

High and sustainable margins

Consistently strong gross and net margins provide structural profitability advantages vs peers, enabling reinvestment in R&D, branded growth and capacity. High margins also create a buffer against pricing cycles, supporting durable cash generation and return metrics over the medium term.

Conservative balance sheet and liquidity

A net cash surplus and low leverage give management flexibility to fund capex, complete integrations, and sustain pipeline investments without immediate financing. This financial headroom lowers execution risk for launches and M&A, improving resilience to regulatory or market delays.

Diversified growth engines and pipeline momentum

Broad exposure across branded India, emerging markets, generics, APIs, biosimilars and CDMO plus tangible semaglutide and abatacept progress reduces reliance on any single product. Multiple secular growth drivers and an active filing pipeline support sustained revenue diversification and secular growth over 2–3 years.

Negative Factors

Weak cash conversion

Earnings are not translating into proportional cash, indicating working‑capital or investment drains. Persistently low cash conversion constrains internal funding for R&D, capex and acquisitions, increases reliance on external financing and magnifies execution risk during margin or revenue pressure.

Margin compression post-Lenalidomide

A step‑down in high‑margin product revenue and broader pricing pressure reduces structural profitability, limiting free cash generation and ROCE. If mix shifts toward lower‑margin unbranded generics persist, reinvestment capacity and long‑term returns could be permanently impaired.

Regulatory risk for key biologics and inspections

Regulatory setbacks and facility observations can materially delay high‑value biologic launches, compress projected revenue and ROI from biosimilars, and strain partner relationships. Prolonged re‑inspections or CRLs increase execution uncertainty for products that drive medium‑term growth.

Dr. Reddy's Laboratories Ltd. Business Overview & Revenue Model

Company Description

Dr. Reddy's Laboratories Ltd. (DRREDDY) is a global pharmaceutical company based in India, specializing in the development, manufacture, and marketing of a wide range of generic and branded medications. The company operates across various sectors, including pharmaceuticals, active pharmaceutical ingredients (APIs), and biotechnology. DRREDDY's core products include prescription medications across multiple therapeutic areas such as oncology, cardiology, and dermatology, as well as over-the-counter products and biosimilars.

How the Company Makes Money

Dr. Reddy's generates revenue primarily through the sale of generic pharmaceuticals, which constitute a significant portion of its earnings. The company develops and markets a diverse portfolio of generic drugs, often capitalizing on the expiration of patents for branded medications. In addition to generics, revenue is also derived from the sale of proprietary drugs and biosimilars. Dr. Reddy's has established partnerships with various healthcare organizations and distributors to enhance its market reach and expand its global footprint. The company's revenue is further supported by its focus on research and development, allowing it to innovate and introduce new products. Additionally, it derives income from the manufacturing of APIs for third-party clients, contributing to its overall financial performance.

Dr. Reddy's Laboratories Ltd. Financial Statement Overview

Summary

Strong profitability and solid balance sheet support an above-average financial profile (Income Statement 86; Balance Sheet 84). The key drag is weaker cash-flow quality/cash conversion (Cash Flow 62), which prevents a top-tier score.

Income Statement

Profitability remains strong, with TTM (Trailing-Twelve-Months) gross margin ~56% and net margin ~17% (healthy for generics). Revenue growth is positive across periods (TTM shows strong top-line acceleration vs the latest annual pace), and earnings are solid. The main offset is margin compression versus prior years (EBITDA and EBIT margins are lower than FY2024 levels), suggesting a slightly less favorable mix/cost environment despite continued growth.

Balance Sheet

The balance sheet looks conservatively positioned with low leverage (TTM debt-to-equity ~0.16) and sizable equity base. Returns on equity are consistently healthy (~17% TTM), supporting quality of earnings. A watch item is that leverage has moved up versus FY2024 (debt increased meaningfully), though it remains well within comfortable levels for the sector.

Cash Flow

Cash generation is positive and free cash flow improved strongly in TTM (Trailing-Twelve-Months) versus the latest annual period, but cash conversion is the weak link: free cash flow is only ~37% of net income in TTM, indicating earnings are not translating into cash at the same rate (potential working-capital/investment drag). Operating cash flow is solid in absolute terms, yet overall cash-flow quality is less consistent than profitability.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	325.54B	279.16B	245.88B	214.39B	189.72B
Gross Profit	190.43B	163.61B	139.34B	113.84B	103.08B
EBITDA	88.84B	79.29B	66.05B	47.74B	45.71B
Net Income	56.54B	55.68B	45.07B	23.57B	17.24B
Balance Sheet
Total Assets	492.99B	387.52B	322.85B	296.65B	265.49B
Cash, Cash Equivalents and Short-Term Investments	57.91B	81.47B	61.80B	44.37B	34.57B
Total Debt	46.77B	20.02B	13.47B	33.84B	30.31B
Total Liabilities	155.82B	106.97B	89.99B	106.13B	90.51B
Stockholders Equity	333.39B	280.55B	230.99B	190.53B	173.06B
Cash Flow
Free Cash Flow	18.92B	18.00B	40.01B	9.06B	23.14B
Operating Cash Flow	46.43B	45.43B	58.87B	28.11B	35.70B
Investing Cash Flow	-51.02B	-40.28B	-41.37B	-26.39B	-22.66B
Financing Cash Flow	11.86B	-3.76B	-26.86B	-2.42B	-298.00M

Dr. Reddy's Laboratories Ltd. Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 1280.40
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For IN:DRREDDY, the sentiment is Neutral. The current price of 1280.4 is above the 20-day moving average (MA) of 1209.31, above the 50-day MA of 1242.82, and above the 200-day MA of 1249.37, indicating a neutral trend. The MACD of -7.11 indicates Negative momentum. The RSI at 48.84 is Neutral, neither overbought nor oversold. The STOCH value of 67.14 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for IN:DRREDDY.

Dr. Reddy's Laboratories Ltd. Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AUROPHARMA	74 Outperform	₹704.11B	19.53	―	0.33%	7.33%	-3.79%
LUPIN	72 Outperform	₹982.60B	22.50	―	0.57%	15.49%	64.37%
ZYDUSLIFE	72 Outperform	₹890.72B	18.21	―	1.19%	14.01%	14.62%
DRREDDY	70 Outperform	₹1.02T	17.82	―	0.63%	14.10%	9.72%
CIPLA	68 Neutral	₹1.07T	23.46	―	0.87%	6.93%	21.55%
TORNTPHARM	66 Neutral	₹1.34T	62.07	―	0.84%	9.11%	18.76%
Sector *	51 Neutral	$7.86B	-0.30	-43.30%	2.27%	22.53%	-2.21%

Dr. Reddy's Laboratories Ltd. Corporate Events

Dr. Reddy’s Publishes Audio Recording of Q3 FY2026 Earnings Call

Dr. Reddy’s Laboratories has notified stock exchanges that the audio recording of its earnings call for the quarter ended December 31, 2025, held on January 21, 2026, has been made publicly available via a web link on the company’s website. The disclosure, made under Indian listing regulations, enhances transparency for investors and other stakeholders by providing direct access to management’s commentary on quarterly performance and outlook, reinforcing the company’s adherence to corporate governance and disclosure norms.

Dr. Reddy’s Releases Q3 FY26 Unaudited Results Investor Presentation

Dr. Reddy’s Laboratories Ltd. has released an investor presentation detailing its unaudited financial results for the third quarter of fiscal year 2026, covering the period ended 31 December 2025. The disclosure, made under Indian securities listing regulations, is intended to update shareholders and market participants on the company’s consolidated performance under IFRS and forms part of its regular financial reporting and investor communication practices.

Dr. Reddy’s Gets USFDA Post-Application Action Letter for Hyderabad Biologics Plant

Dr. Reddy’s Laboratories has received a Post-Application Action Letter from the US Food and Drug Administration following a pre-approval inspection of its biologics manufacturing facility at Bachupally, Hyderabad. The company said it will work closely with the US regulator to address the queries raised, underscoring the importance of resolving these compliance issues for the approval timeline of its biologics products and for maintaining its position in the highly regulated U.S. pharmaceutical market.

Dr. Reddy’s Laboratories Receives USFDA Observations Post-Inspection

Dr. Reddy’s Laboratories Ltd. announced that the USFDA completed a GMP and Pre-Approval Inspection at its formulations facility in Srikakulam, Andhra Pradesh. The inspection, which took place from December 4 to December 12, 2025, resulted in a Form 483 with five observations. The company plans to address these observations within the stipulated timeline, which is crucial for maintaining its compliance and operational efficiency in the competitive pharmaceutical industry.

Dr. Reddy’s Laboratories to Engage with Investors at Hyderabad Conference

Dr. Reddy’s Laboratories Ltd. has announced its participation in an upcoming investor conference organized by B&K Securities in Hyderabad. This engagement is part of the company’s ongoing efforts to maintain transparency and engage with institutional investors, which could potentially impact its market positioning and investor relations positively.

Dr. Reddy’s Laboratories Releases Q2 FY26 Earnings Call Transcript

Dr. Reddy’s Laboratories Ltd. has released the transcript of its earnings call for the quarter and half-year ending September 30, 2025. This disclosure is part of the company’s compliance with regulatory requirements, and the transcript is available on their website. The earnings call, conducted on October 24, 2025, featured key management figures, including the CEO and CFO, discussing the company’s financial performance and strategic outlook. This announcement provides stakeholders with insights into the company’s operational and financial health, potentially impacting investor decisions and market perceptions.