Dr Reddy's Laboratories (RDY) AI Stock Analysis

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Dr Reddy's Laboratories

(NYSE:RDY)

Rating:77Outperform

Price Target:―

Dr Reddy's Laboratories receives a solid overall score due to its strong financial performance, especially in revenue growth and balance sheet stability. Technical indicators show positive momentum, although the stock is below its long-term average. Valuation is reasonable, but dividend yield is low. The recent earnings call was positive, highlighting growth and strategic advancements despite some market challenges.

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

Market Cap

$13.18B

Dividend Yield0.6%

Average Volume (3M)1.62M

Price to Earnings (P/E)19.8

Beta (1Y)0.46

Revenue Growth13.26%

EPS Growth1.33%

CountryUS

Employees27,048

SectorHealthcare

Sector Strength55

IndustryDrug Manufacturers - Specialty & Generic

Share Statistics

EPS (TTM)0.22

Shares Outstanding834,474,200

10 Day Avg. Volume1,839,950

30 Day Avg. Volume1,616,751

Financial Highlights & Ratios

PEG Ratio0.27

Price to Book (P/B)3.32

Price to Sales (P/S)0.00

P/FCF Ratio21.94

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 Upside4.51% 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. The company operates in the healthcare sector, focusing on the development and manufacture of a broad range of pharmaceutical products. Dr. Reddy's core offerings include generic medications, active pharmaceutical ingredients (APIs), biosimilars, and proprietary products. The company aims to provide affordable and innovative medicines for patients worldwide, with a presence in over 20 countries.

How the Company Makes MoneyDr. Reddy's Laboratories generates revenue primarily through the sale of generic drugs, which are cost-effective versions of branded medications that become available after the original patents expire. The company also earns money by manufacturing and selling active pharmaceutical ingredients (APIs) to other pharmaceutical companies. Additionally, Dr. Reddy's invests in research and development to create biosimilars—biological products highly similar to already approved reference products—to expand its product portfolio. The company's proprietary products, which include differentiated formulations and novel drug delivery systems, contribute to its revenue streams. Strategic partnerships and collaborations with other pharmaceutical companies and research institutions further enhance Dr. Reddy's market reach and product offerings, playing a significant role in its financial performance.

Dr Reddy's Laboratories Earnings Call Summary

Earnings Call Date:May 09, 2025

(Q3-2025)

% Change Since: 22.69%|

Next Earnings Date:Jul 24, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted strong financial performance with record revenue and EBITDA, significant growth in the European market, progress in biosimilars, and sustainability accolades. However, there were challenges in the U.S. generics market, regulatory issues in Hyderabad, and a sequential decline in the India business.

Q3-2025 Updates

Positive Updates

Record Quarterly Revenue and EBITDA

Dr. Reddy's Laboratories achieved its highest ever quarterly revenue and EBITDA in Q3 FY '25, driven by a 16% year-on-year revenue growth to INR 8,359 crores (USD 977 million) and the inclusion of the Nicotine Replacement Therapy business.

Strong Growth in Europe

The European Generics business, including NRT, recorded USD 134 million in revenue, a 142% year-over-year increase. Excluding NRT, the growth was 22% YoY.

Significant Progress in Biosimilars

Dr. Reddy's secured marketing authorization for rituximab in the U.K. and filed denosumab in both the U.S. and Europe, marking progress in their biosimilars journey.

Sustainability and ESG Recognition

Dr. Reddy's achieved an ESG score of 79 out of 100, placing them fifth globally among pharma companies in the S&P Global CSA. They continue to be members of the DJSI World Index and have an upgraded MSCI ESG rating of A.

Negative Updates

Challenges in U.S. Generics Market

The North America generics business revenue was flat year-on-year at USD 401 million, with a sequential decline of 10% due to price erosion and lower sales from certain products, including lenalidomide.

Regulatory Setback at Hyderabad Facility

The U.S. FDA issued a Form 483 with seven observations following a GMP inspection at Dr. Reddy's facility in Hyderabad, which the company needs to address.

Decline in India Business Sequentially

India business revenue declined 4% sequentially with slower growth in cardiac and gastrointestinal segments, which the company is addressing.

Company Guidance

In the Q3 FY '25 earnings call for Dr. Reddy's Laboratories, the company reported a robust financial performance, marked by a 16% year-on-year revenue growth to INR 8,359 crores (USD 977 million) and a 27.5% EBITDA margin. The newly acquired Nicotine Replacement Therapy (NRT) business contributed INR 605 crores to the revenue. Excluding NRT, the underlying growth was 7.5% year-on-year. The gross profit margin stood at 59%, with significant contributions from Global Generics and PSAI segments at 61.3% and 28.6%, respectively. The SG&A expenses rose by 19% year-over-year to INR 2,412 crores, driven by the NRT acquisition and increased logistics costs. The R&D expenditure was INR 666 crores, representing 8% of sales, with a focus on complex generics and biosimilars. The company anticipates maintaining an R&D spend of 8.5% to 9% of sales for the full fiscal year. Profit before tax was INR 1,874 crores, with an effective tax rate of 25.1%. The company reported an EPS of INR 16.94, reflecting a 13% quarter-on-quarter growth in profit after tax.

Dr Reddy's Laboratories Financial Statement Overview

Summary

Dr Reddy's Laboratories demonstrates strong financial health overall, with impressive revenue growth and profitability metrics. The balance sheet is solid, with low leverage and high equity ratios, ensuring financial stability. However, there is room for improvement in cash flow management, particularly in enhancing free cash flow generation relative to net income.

Income Statement

Very Positive

Dr Reddy's Laboratories shows strong revenue growth with a 11.51% increase in TTM compared to the previous annual period. The gross profit margin stands at 59.32%, and the net profit margin is a healthy 17.24% for the TTM, indicating efficient cost management and profitability. EBIT and EBITDA margins are strong at 22.15% and 28.40% respectively, reflecting operational efficiency.

Balance Sheet

Positive

The company maintains a solid equity base, as evidenced by a debt-to-equity ratio of 0.16, indicating low financial leverage. Return on equity (ROE) for the TTM is robust at 16.89%, suggesting effective use of equity capital to generate profits. The equity ratio stands at 66.03%, highlighting financial stability and a strong balance sheet.

Cash Flow

Positive

Free cash flow has decreased from previous periods, with a notable drop in free cash flow growth rate. The operating cash flow to net income ratio is 0.67, indicating that net income is well-supported by operating cash flows, although this has declined compared to previous years. Free cash flow to net income ratio is 0.12, showing room for improvement in cash generation relative to earnings.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
311.31B	279.16B	245.88B	214.39B	189.72B	174.60B
	Gross Profit
184.65B	163.61B	202.97B	113.84B	103.08B	94.01B
	EBIT
68.98B	67.73B	96.28B	40.82B	36.06B	37.05B
	EBITDA
88.43B	88.42B	74.43B	47.74B	45.71B	41.78B
	Net Income Common Stockholders
53.68B	55.68B	45.07B	23.57B	17.24B	19.50B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
59.18B	81.47B	66.75B	44.37B	34.57B	25.74B
	Total Assets
481.06B	387.52B	322.85B	296.65B	265.49B	232.24B
	Total Debt
51.09B	20.02B	13.47B	33.84B	30.31B	22.10B
	Net Debt
38.80B	12.91B	7.69B	18.99B	15.48B	20.05B
	Total Liabilities
159.49B	106.97B	89.99B	106.13B	90.51B	77.25B
	Stockholders Equity
317.72B	280.55B	232.86B	190.53B	174.98B	154.99B
Cash Flow		Free Cash Flow
6.52B	18.00B	40.01B	9.06B	23.14B	23.73B
	Operating Cash Flow
35.95B	45.43B	58.87B	28.11B	35.70B	29.84B
	Investing Cash Flow
-56.13B	-40.28B	-41.37B	-26.39B	-22.66B	-4.92B
	Financing Cash Flow
25.75B	-3.76B	-26.86B	-2.42B	-298.00M	-25.16B

Dr Reddy's Laboratories Technical Analysis

Technical Analysis Sentiment

Positive

Last Price16.17

Price Trends

50DMA

14.06

Positive

100DMA

13.75

Positive

200DMA

14.53

Positive

Market Momentum

MACD

0.53

Negative

RSI

80.69

Negative

STOCH

95.94

Negative

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 16.17 is above the 20-day moving average (MA) of 14.92, above the 50-day MA of 14.06, and above the 200-day MA of 14.53, indicating a bullish trend. The MACD of 0.53 indicates Negative momentum. The RSI at 80.69 is Negative, neither overbought nor oversold. The STOCH value of 95.94 is Negative, 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 (54)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RDY	77 Outperform	$13.18B	19.79	18.36%	0.60%	13.26%	1.33%
NBIX	74 Outperform	$12.35B	42.10	12.43%	―	21.73%	-19.24%
LNTH	69 Neutral	$5.56B	22.92	24.11%	―	12.53%	-45.33%
TEVA	57 Neutral	$20.84B	―	-18.98%	―	3.38%	-175.90%
Sector *	54 Neutral	$5.38B	3.31	-45.11%	3.29%	16.82%	0.04%
VTRS	53 Neutral	$10.61B	―	-21.25%	5.31%	-6.88%	-6809.78%

* Healthcare Sector Average

Performance Comparison

RDY

Dr Reddy's Laboratories

16.17

1.71

11.83%

VTRS

Viatris

9.09

-0.83

-8.37%

NBIX

Neurocrine

125.01

-11.25

-8.26%

TEVA

Teva Pharmaceutical

17.71

0.31

1.78%

LNTH

Lantheus

80.14

0.06

0.07%

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.