Dr Reddy's Laboratories (RDY) AI Stock Analysis

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Dr Reddy's Laboratories

(NYSE:RDY)

Rating:71Outperform

Price Target:

$16.50

▲(12.17%Upside)

Dr Reddy's Laboratories demonstrates strong financial performance and a solid balance sheet, which are major strengths. However, technical analysis indicates potential weakness, and the earnings call presents a mixed outlook with both positive strategic advancements and notable challenges. These factors combine to form a moderately strong overall stock score.

Dr Reddy's Laboratories (RDY) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$12.20B

Dividend Yield0.03%

Average Volume (3M)1.45M

Price to Earnings (P/E)18.3

Beta (1Y)0.43

Revenue Growth13.03%

EPS Growth-0.49%

CountryUS

Employees27,048

SectorHealthcare

Sector Strength37

IndustryDrug Manufacturers - Specialty & Generic

Share Statistics

EPS (TTM)0.20

Shares Outstanding834,542,700

10 Day Avg. Volume1,428,240

30 Day Avg. Volume1,453,389

Financial Highlights & Ratios

PEG Ratio-0.60

Price to Book (P/B)3.12

Price to Sales (P/S)0.00

P/FCF Ratio67.94

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$16.90

Price Target Upside14.89% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

Dr Reddy's Laboratories Business Overview & Revenue Model

Company DescriptionDr. Reddy's Laboratories Ltd is a global pharmaceutical company headquartered in Hyderabad, India. It operates in several key sectors, including pharmaceutical services, active pharmaceutical ingredients (APIs), and generic and branded formulations. The company is engaged in the development, manufacture, and marketing of a wide range of pharmaceutical products, with a focus on therapeutic areas such as gastroenterology, cardiovascular, pain management, oncology, and dermatology. Dr. Reddy's also offers biosimilars and has a robust pipeline of new drugs under development.

How the Company Makes MoneyDr. Reddy's Laboratories generates revenue through multiple streams. Its primary source of income is the sale of generic and branded pharmaceutical products across global markets, including India, the United States, and other international regions. The company also earns from the production and sale of active pharmaceutical ingredients (APIs) to other manufacturers. Furthermore, Dr. Reddy's is involved in the biosimilar segment, providing alternatives to biologic drugs, which is a growing area of revenue. Partnerships and collaborations with other pharmaceutical entities, research institutions, and healthcare organizations enhance its product offerings and market reach, contributing to its financial performance. Additionally, Dr. Reddy's invests in research and development to create innovative products, ensuring long-term revenue growth through new and improved therapeutic solutions.

Dr Reddy's Laboratories Earnings Call Summary

Earnings Call Date:Jul 23, 2025

(Q1-2026)

% Change Since: 2.08%|

Next Earnings Date:Oct 24, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted steady revenue growth and strategic advancements in biosimilars and Indian markets as positive aspects. However, these were offset by challenges in the U.S. generics business, decreased gross profit margins, and regulatory observations. The increase in SG&A expenses also added pressure. Overall, the positive aspects were balanced by significant lowlights.

Q1-2026 Updates

Positive Updates

Double-Digit Revenue Growth

Dr. Reddy's Laboratories reported a steady double-digit revenue growth of 11% year-over-year, driven by strong performance across most markets, excluding the U.S. generics business.

EBITDA Margin Exceeds Expectations

The company achieved an EBITDA margin of 26.7%, surpassing their aspiration of 25%.

Biosimilar Business Momentum

The biosimilar business gained momentum due to strategic collaboration with Alvotech for co-development, manufacturing, and commercialization of pembrolizumab.

Carbon Disclosure Project Rating

Dr. Reddy's Laboratories received an 'A' rating in the climate category from the Carbon Disclosure Project, making it the only Indian pharmaceutical company with this score.

Indian Market Performance

The India business reported double-digit growth of 11% year-on-year, driven by new products and pricing. The company maintained its position as the 10th largest player in the Indian pharmaceutical market.

Negative Updates

U.S. Generics Business Decline

The North American business revenue declined by 17% year-on-year due to price erosion in selected products, especially lenalidomide.

Gross Profit Margin Decrease

The consolidated gross profit margin for the quarter was 56.9%, a decrease of 350 basis points year-on-year, primarily due to price erosion in the generic segment.

Regulatory Challenges

The USFDA issued Form 483 with observations for multiple facilities, which could impact future operations if not resolved.

PSAI Business Seasonal Weakness

The PSAI business experienced a 14% sequential decline in revenue due to seasonal weakness and under-recovery of overheads.

Increased SG&A Expenses

SG&A expenses increased by 13% year-over-year, primarily driven by strategic growth-oriented investments, leading to SG&A expenses accounting for 30% of sales.

Company Guidance

During the Q1 FY '26 earnings call of Dr. Reddy's Laboratories Limited, the company reported several key financial metrics and business updates. The firm achieved a consolidated revenue of INR 8,545 crores (USD 997 million), marking an 11% year-over-year growth. They recorded an EBITDA margin of 26.7%, slightly surpassing their 25% aspiration. However, the gross profit margin decreased by 350 basis points year-on-year to 56.9%, due primarily to price erosion in the generic segment. The R&D expenditure remained stable at INR 624 crores (USD 73 million), and SG&A expenses increased by 13% year-over-year to INR 2,565 crores (USD 299 million). The company maintained a robust balance sheet with a net cash surplus of INR 2,922 crores (USD 341 million), and the RoCE for the quarter was 22%. Dr. Reddy's also emphasized their strategic focus on the semaglutide and abatacept pipeline and noted progress in strategic collaborations and biosimilar operations.

Dr Reddy's Laboratories Financial Statement Overview

Summary

Dr Reddy's Laboratories demonstrates strong financial performance with consistent revenue and profit growth, solid financial position with a strong equity base, and a stable cash flow position. Despite a slight decline in cash flow indicators, overall financial health remains robust.

Income Statement

Very Positive

Dr Reddy's Laboratories demonstrates strong financial performance with consistent revenue and profit growth. The company achieved a Gross Profit Margin of 58.5% and a Net Profit Margin of 17.4% for the fiscal year ending March 2025. Revenue growth rate from 2024 to 2025 was 16.6%, indicating a robust growth trajectory. EBIT Margin and EBITDA Margin were 22.1% and 29.7%, respectively, showcasing efficient cost management and operational profitability.

Balance Sheet

Very Positive

The balance sheet of Dr Reddy's Laboratories reflects a solid financial position with a strong equity base. The Debt-to-Equity Ratio stands at a manageable 0.14, indicating low financial leverage. Return on Equity (ROE) is impressive at 16.96% for the year ending March 2025, suggesting effective utilization of equity to generate profits. The Equity Ratio is 67.6%, highlighting a strong capital structure with a significant portion of assets financed by equity.

Cash Flow

Positive

Dr Reddy's Laboratories portrays a stable cash flow position with a Free Cash Flow to Net Income Ratio of 0.21 for the fiscal year ending March 2025. The Operating Cash Flow to Net Income Ratio is 0.82, indicating robust cash generation capabilities relative to net income. Despite a decrease in Free Cash Flow from the previous year, the company's cash flow remains healthy and supports its operational and investment needs.

Breakdown	Mar 2025	Mar 2024	Mar 2023	Mar 2022	Mar 2021
Income Statement
Total Revenue	325.54B	279.16B	245.88B	214.39B	189.72B
Gross Profit	190.43B	163.61B	202.97B	113.84B	103.08B
EBITDA	96.67B	88.42B	74.43B	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	66.75B	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	232.86B	190.53B	174.98B
Cash Flow
Free Cash Flow	12.03B	18.00B	40.01B	9.06B	23.14B
Operating Cash Flow	46.43B	45.43B	58.87B	28.11B	35.70B
Investing Cash Flow	-58.08B	-40.28B	-41.37B	-26.39B	-22.66B
Financing Cash Flow	18.91B	-3.76B	-26.86B	-2.42B	-298.00M

Dr Reddy's Laboratories Technical Analysis

Technical Analysis Sentiment

Positive

Last Price14.71

Price Trends

50DMA

14.91

Negative

100DMA

14.10

Positive

200DMA

14.38

Positive

Market Momentum

MACD

-0.12

Positive

RSI

47.99

Neutral

STOCH

37.08

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RDY, the sentiment is Positive. The current price of 14.71 is below the 20-day moving average (MA) of 14.76, below the 50-day MA of 14.91, and above the 200-day MA of 14.38, indicating a neutral trend. The MACD of -0.12 indicates Positive momentum. The RSI at 47.99 is Neutral, neither overbought nor oversold. The STOCH value of 37.08 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RDY.

Dr Reddy's Laboratories Risk Analysis

Dr Reddy's Laboratories disclosed 60 risk factors in its most recent earnings report. Dr Reddy's Laboratories reported the most risks in the "Legal & Regulatory" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Dr Reddy's Laboratories Peers Comparison

Overall Rating

UnderperformOutperform

Sector (65)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
NBIX	77 Outperform	$13.23B	45.32	12.43%	―	21.73%	-19.24%
LNTH	73 Outperform	$5.07B	20.80	24.11%	―	12.53%	-45.33%
RDY	71 Outperform	$12.20B	18.26	18.36%	0.03%	13.03%	-0.49%
Sector *	65 Neutral	¥355.44B	11.10	-2.99%	2.49%	11.76%	-10.16%
TEVA	55 Neutral	$19.15B	―	-18.98%	―	3.38%	-175.90%
VTRS	54 Neutral	$11.00B	―	-21.25%	5.12%	-6.88%	-6809.78%

* Healthcare Sector Average

Performance Comparison

RDY

Dr Reddy's Laboratories

14.71

-1.45

-8.97%

VTRS

Viatris

9.35

-2.19

-18.98%

NBIX

Neurocrine

131.64

-15.16

-10.33%

TEVA

Teva Pharmaceutical

16.33

-0.77

-4.50%

LNTH

Lantheus

70.93

-41.78

-37.07%

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Jul 25, 2025