2. Is Dr. Reddys Laboratories Ltd undervalued or overvalued?
The key valuation ratios of Dr. Reddys Laboratories Ltd's currently when compared to its past seem to suggest it is in the Fair zone.
3. Is Dr. Reddys Laboratories Ltd a good buy now?
The Price Trend analysis by MoneyWorks4Me indicates it is Strong which suggest that the price of Dr. Reddys Laboratories Ltd is likely to Rise in the short term. However, please check the rating on Quality and Valuation before investing
10 Year X-Ray of Dr. Reddys Lab:
Analysis of Financial Track Record
Data adjusted to bonus, split, extra-ordinary income, rights issue and change in financial year end
Data adjusted to bonus, split, extra-ordinary income, rights issue and change in financial year end
Data adjusted to bonus, split, extra-ordinary income, rights issue and change in financial year end.
What is a Financial Track Record? How to read this chart in order to understand the data present here?
Financial track record gives insight into the company's performance on key parameters over the past ten years. MoneyWorks4me’s proprietary colour codes make it easy for retail investors to gauge the company’s past performance.
Dr. Reddys Laboratories Ltd has performed well in majority of the past ten years indicating its past ten year financial track record is very good
Value Creation ⓘ
Value Creation Index Colour Code Guide
ⓘ
Mar'15
Mar'16
Mar'17
Mar'18
Mar'19
Mar'20
Mar'21
Mar'22
Mar'23
Mar'24
TTM
ROCE % ⓘ
22.7%
19.6%
9.8%
8.2%
13.7%
11.1%
15.5%
14.6%
26.2%
26.9%
-
Value Creation Index ⓘ
1.0
0.7
-0.1
-0.3
0.2
0.0
0.4
0.3
1.3
1.4
-
Growth Parameters ⓘ
Growth Parameters Colour Code Guide
ⓘ
Sales ⓘ
15,023
15,568
14,196
14,281
15,448
17,517
19,048
21,545
24,670
28,011
32,554
Sales YoY Gr.
-
3.6%
-8.8%
0.6%
8.2%
13.4%
8.7%
13.1%
14.5%
13.5%
-
Adj EPS ⓘ
26.8
28.5
15.7
11.4
22
23.9
22.5
23.7
53.3
65.9
67.8
YoY Gr.
-
6.2%
-45%
-27%
93%
8.5%
-6.1%
5.7%
124.6%
23.6%
-
BVPS (₹) ⓘ
114.6
146.3
146.9
150.5
168
186.5
210.5
229.2
277.8
337.2
402
Adj Net Profit ⓘ
2,282
2,427
1,297
947
1,830
1,987
1,868
1,976
4,437
5,496
5,655
Cash Flow from Ops. ⓘ
2,524
3,263
2,144
1,803
2,870
2,984
3,570
2,811
5,888
4,543
-
Debt/CF from Ops. ⓘ
1.7
1
2.3
2.8
1.3
0.7
0.9
1.2
0.2
0.4
-
CAGR ⓘ
CAGR Colour Code Guide
ⓘ
9 Years
5 Years
3 Years
1 Years
Sales ⓘ
7.2%
12.6%
13.7%
13.5%
Adj EPS ⓘ
10.5%
24.5%
43.2%
23.6%
BVPSⓘ
12.7%
15%
17%
21.4%
Share Price
7%
10.6%
16.9%
11.1%
Key Financial Parameters ⓘ
Performance Ratio Colour Code Guide
ⓘ
Mar'15
Mar'16
Mar'17
Mar'18
Mar'19
Mar'20
Mar'21
Mar'22
Mar'23
Mar'24
TTM
Return on Equity % ⓘ
25.8
21.7
10.5
7.6
13.8
13.4
11.2
10.7
20.9
21.3
18.3
Op. Profit Mgn % ⓘ
23.4
25.8
17.5
16.5
20.6
14.1
20.3
17.5
26.2
28.3
26.4
Net Profit Mgn % ⓘ
15.2
15.5
8.9
6.4
11.9
11.3
9.8
9.2
18
19.6
17.4
Debt to Equity ⓘ
0.4
0.3
0.4
0.4
0.3
0.1
0.2
0.2
0.1
0.1
0
Working Cap Days ⓘ
187
193
212
222
214
207
213
216
212
221
137
Cash Conv. Cycle ⓘ
122
128
140
137
130
126
132
135
131
128
66
Recent Performance Summary
Return on Equity has increased versus last 3 years average to 18.30%
Sales growth is growing at healthy rate in last 3 years 13.72%
Net Profit is growing at healthy rate in last 3 years 43.15%
It is our opinion that the current valuations are ahead of the expected growth. The Price to Earnings Ratio of 19 masks the fact that a large part of the profit will be non-recurring after January 31st, 2026. The company’s TTM EBITDA Margin of 27% is significantly higher than its 10 year average of 21%, and a reversion to mean is expected. Based solely on a recurring rate of revenue, the adjusted P/E would be at least 30, while growth prospects seem low.
The problems with the sustainability of earnings are due to challenges in North America. North America is the largest segment of the business, accounting for around half of the company’s sales. This segment has become the most profitable and highest growing segment over the last 2 years, mainly due to sales of Revlimid in the United States. Our estimates suggest that Revlimid sales account for a very large portion of the company’s current profits. The exclusivity for the drug ends on January 31st 2026, and the subsequent price erosion would lead to an overall reduction in sales and profits.
The problem is twofold: (a) the company needs to find a replacement for existing profits and (b) find a new source for growth by 31st January 2026. In our opinion, the company’s current pipeline is weaker than that of peers, which makes future growth prospects seem ambitious because replacing Revlimid sales and profits itself would be challenging due to the extremely high profitability of the drug.
Dr. Reddy’s Laboratories: Q4FY24 Result Update - 24 May 2024
Particulars
Q4FY24 (Rs.Cr)
YoY(%) Trend
Comments
Revenue
7114
+12.65%
EBITDA
1831
+19.29%
EBITDA Margin (%)
26%
+145 bps
PAT
1310
+36.45%
Low Effective Tax Rate in Q4FY24
Dr. Reddy’s Laboratories Quarterly Call: Key Takeaways
Exclusive Partnership with Nestle: The company has formed a JV with Nestle Health Sciences to bring their range of nutraceuticals to India. The contribution from this business should be visible FY27 onwards.
Regulatory Scrutiny: The company has received a Complete Response Letter (CRL) from the USFDA regarding their Biologics License Application for a biosimilar rituximab, indicating that the application will not be approved in its present form. This highlights growth concerns.
Research and Development: R&D investments for the quarter amounted to Rs. 688 crores, reflecting a 28% year-on-year increase. This growth was driven by the biosimilar products pipeline, along with development efforts in generics and novel oncology assets at Aurigene. The level of R&D for next year will be around 8.5% to 9%. Out of this, 20 is earmarked for biologics.
Price Erosion: The company has started to face price erosion in the United States and Europe which are expected to impact sales of current products, excluding Revlimid.
Guidance: The company maintains its long term guidance of 25% EBITDA Margins and 25% ROCE, along with double digit revenue growth.
Dr. Reddy's Laboratories: Stock Pulse - 23 May 2024
About the Company
Dr Reddy’s is a leading Indian pharmaceutical company headquartered in Hyderabad, Telangana. Its major therapeutic areas of focus are gastrointestinal, cardiovascular, diabetology, oncology, pain management and dermatology and its major markets include – USA, India, Russia and CIS (Commonwealth of Independent States) countries, China, Brazil and Europe. The company’s main business segments are Global Generics, which includes sale of branded and unbranded generic drugs, and Pharmaceutical Services and Active Ingredients (PSAI), which majorly includes the sale of Active Pharmaceutical Ingredients (APIs).
North America is the largest market for the company’s generics, which accounts for 47% of the total revenue. This is due to the fact that the United States is the world’s largest market with a high GDP per capita leading to higher prices for drugs. Overall, the global generics business accounts for 88% of the total revenue, while PSAI accounts for 11%.
Financial Performance
The financial performance of pharmaceutical company tends to be volatile due to dependence on regulators, product launches, price erosion and price ceilings that may be applicable in various markets. The tables below highlight the volatility in financial performance.
As the table shows, the earnings per share between FY14 and FY24 have been extremely volatile. The period till FY16 marked the benefits of the patent cliff in the United States which led to the launch of various off patent drugs, while the FY17 and FY18 were marked by price erosion, distributor consolidation in the United States and problems regarding FDA facility inspections. Between FY19 and FY23, the company has been able to improve its performance by entering new markets, launching new products, and effective cost control measures. While such improvements have taken place, one must consider the sustainability of earnings given the cyclical nature of earnings. A key change in the company has been the appointment of Erez Israeli as COO in FY19 and CEO in FY20, who has helped make the company more efficient.
Understanding the Business
India: The company derives 17% of its revenue from India through the sale of branded generics. Revenues from India have grown at an annualised rate of 12% over the last 5 years. The company has made strategic investments like Cidmus to improve to cardiac portfolio while divesting certain non-core brands in the dermatology, paediatric, gynaecology, and urology segments. The company aims to improve its contribution from chronic therapies, which stands at 35% currently.
Emerging Markets: Russia, Commonwealth of Independent States (CIS) and Romania accounted for 64% of the revenue from Emerging Markets in FY24. Many emerging markets are too small for domestic players due to the high research and development costs that would be associated with drug development and therefore depend on imports. India, and therefore Dr Reddy’s Laboratories, is a key exporter to such regions. However, geopolitical issues can have a severe impact on sales as well as the ability to supply such geographies. For example, Venezuela was a profitable emerging market until FY17 that has faced geopolitical and macroeconomic problems. As a result, business in this country had to be significantly curtailed due to the high risks. Additionally, foreign exchange remains a key risk for this business segment.
Europe: Europe is the largest pharmaceutical market after the United States. The company has grown its revenue from Europe by 21% annually over the last 5 years. This has been achieved through the launch of new products, penetration in newer geographies while facing price erosion due to the competitive nature of the markets. Germany is the largest European market for the company.
North America: The large share of revenue from the United States is primarily responsible for the volatility in sales and profits. With the end of the patent cliff (a period in which a large number of key drugs lose patent protection) in the United States, 2017 and 2018 witnesses significant price erosion leading to a 20% fall in segment revenue over a two year period. The profitability and sales are highly dependent on patent expirations and the ability to compete through early launches. The company launched g-Revlimid in FY2023 through an early settlement with the innovator giving it a limited volume launch. This is largely responsible for the increase in profitability in FY23 and FY24 and is expected to continue until January 2026. Growth after 2026 is expected to come from biologics, as this segment will witness a large number of patent expirations during this period.
PSAI: While this division contributes 11% to the total revenue, the business has a significantly lower gross margin than the generic business. As a result, the overall growth in this segment has only been 4% annually over a 5 year period. Additionally, this business has a high volatility in its gross margins. Due to the lower overall gross margins from this business and the low revenue contribution, the overall impact of this segment on the business is manageable.
What are the growth and margin expectations?
Margins: PAT margins have improved from 9% in FY17 to 20% for FY24. As the table above shows, the major reason for the improvement in EBITDA and PAT Margins is the reduction in R&D and SG&A as a percentage of revenues. R&D has not only declined from 14% in FY17 to 8% for FY24, the absolute spend on R&D has also declined over time until FY24, when it increased. Additionally, SG&A expenditure as a percentage of revenues has fallen from 33% in FY17 to 28% for FY24. While there has been an improvement in gross margins as well, the sustainability of the margins is highly dependent on successful new launches while maintaining the risk of price erosion.
Overall, the long term EBITDA margins are guided to be around the 25% range as gross margins would fluctuate while other overhead costs are likely to be maintained at the current percentages.
Growth: India, Emerging Markets and Europe are expected to have growth in double digits over the next few years even though fluctuations are expected on a yearly basis. This expectation is based on the strong positioning of the company in these markets. While Europe does maintain the risk of price erosion, new product launches in this segment and overall low contribution to revenue would not have a strong impact on overall growth expectations.
The growth in the North American market in the previous year is primarily attributable to the launch of g-Revlimid. Growth in Revlimid is expected till January 31st, 2026 when the company loses exclusivity. Due to a structural change in the North American market, the focus has shifted towards biologics, which are more complex and difficult to replicate. This would lead to lower growth rates for chemical generics than that witnessed in the previous cycle, but overall growth would still remain high. The company has begun development of biologics with significant expected launches between FY27 and FY30 which suggests a long term growth potential for the company. However, the company currently faces regulatory challenges in its biologics division, which might hinder the growth of this segment.
Dr Reddys Laboratories: Q2FY24 result update - 04 Nov 2023
Particulars
Q2FY24 (Rs. Crs)
YoY Trend
Comments
Revenue
6,903
+9%
On back of 9% growth in global generics and 17% in pharma services segment
EBITDA
2,008
+6%
EBITDA Margin
29%
-90 bps
No major change
PAT
1,482
+33%
Excluding other income PAT growth at 4% YoY
Good results, plans to focus on licensing and collaborating with partners to bring innovation to India and strengthen its presence in the generic business.
Dr. Reddys Laboratories: Q3FY23 Result Update - 30 Jan 2023
Market Cap Rs. 71,995cr
CMP Rs. 4,321 | PE 19.8x TTM
Results
INR Cr.
Y-o-Y Growth
Comments
Revenue
6,770
27.3%
Revenue growth of 27.3% YoY led by strong growth in USA (64% YoY), Emerging Markets (14% YoY) and India (10% YoY)
Gross Profit
4,009
40.1%
Gross margins came in at 59.2% (vs 53.8% in Q3FY22) primarily driven by new product launches with higher margin profiles, favourable product and favourable forex movements
EBITDA
2,082
69.9%
EBITDA margins came in at 30.8% (vs 23% in Q3FY22) due higher gross margins and relative reduction in SG&A expenses
US sales growth driven by launch of gRevlimid (revenue of ~$140mn in Q3), 5 new launches and favourable forex movements, which was partly offset by price erosion in some molecules.
Emerging markets growth was primarily due to the strong growth experienced in Russia (45% YoY). It launched 29 products in Q3.
India sales growth was led by price hikes and 2 new product launches, although there was volume contraction in certain molecules.
Management Outlook:
Management expects contribution from gRevlimid to fluctuate quarterly but to remain meaningful on annual basis. It also expects ex-gRevlimid business in the US to grow in single digits.
Management expects Indian business to sustain double-digit growth through a combination of organic route, product innovation, investments in marketing and divestment of legacy brands.
The company is looking to file double-digit number of products in China (40-50 over the next 3 years). Meaningful ramp up in growth of China operations are expected by H2FY24 by the management.
Management has guided EBITDA margins and RoCE to be ~25%.
Company share prices are keep on changing according to the market conditions. The closing price of Dr. Reddys Lab on 20-Jun-2025 16:01 is ₹1,325.5.
What is the market cap of Dr. Reddys Lab?
Market capitalization or market cap is determined by multiplying the current market price of a company's shares with the total number of shares outstanding. As of 20-Jun-2025 16:01 the market cap of Dr. Reddys Lab stood at ₹1,10,697.5.
What is the P/E ratio of Dr. Reddys Lab?
The latest P/E ratio of Dr. Reddys Lab as of 20-Jun-2025 16:01 is 20.69.
What is the P/B ratio of Dr. Reddys Lab?
The latest P/B ratio of Dr. Reddys Lab as of 20-Jun-2025 16:01 is 3.84.
What is the 52-week high and low of Dr. Reddys Lab?
The 52-week high of Dr. Reddys Lab is ₹1,420.2 and the 52-week low is ₹1,025.9.
What is the TTM revenue of Dr. Reddys Lab?
The TTM revenue is Trailing Twelve Months sales. The TTM revenue/sales of Dr. Reddys Lab is ₹23,047 ( Cr.) .
About Dr. Reddys Laboratories Ltd
Dr. Reddy’s Laboratories Limited commenced its generics business in India in 1986 and is today a trusted name in the healthcare industry consistently serving the needs of millions of patients with high quality, affordable and innovative medicines across therapy areas. The company’s shares trade on the Bombay Stock Exchange and the National Stock Exchange in India and on the New York Stock Exchange in the United States.
Business area of the company
The company is a leading India-based pharmaceutical company headquartered and having its registered office in Hyderabad, Telangana, India. Through its three businesses - Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary Products - the Company offers a portfolio of products and services, including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimilars and differentiated formulations.
Products
Generics
Over-the-counter
APIs (Active Pharmaceutical Ingredients)
Biologics
Differentiated Formulations
Core Businesses
Pharmaceutical services & active ingredients
Global leader in integrated development, manufacturing and supply of APIs.
Contract research, development and manufacturing services.
Global Generics
Finished dosage businesses in distribution-driven unbranded as well as detailing-driven branded markets.
North America, Europe, India, China, Russia & CIS countries are key markets in this segment.
Proprietary Products
Developing differentiated formulations that present significantly enhanced benefits in terms of efficacy, ease of use, and the resolution of unmet patient needs.
Awards & Recognitions
India’s Best Managed Boards by Mint and Aon Hewitt and by Economic Times and Hays in their respective studies.
India’s Best Companies to Work For in the Biotechnology and Pharmaceuticals sector by Great Place To Work Institute.
‘Best Places to Work’ in 2017 in New Jersey by NJBIZ.
Global Generics & Biosimilar Award 2018 for CSR initiative of the year
India Pharma Corporate Social Responsibility (CSR) programme of the year Award 2018 by Department of Pharmaceuticals, Government of India.
Dr. Reddy’s ranked among the top 10 in the Forbes China 2018 list of leading Indian Companies in China.
Dr. Reddy’s inclusion in the 2019 Bloomberg Gender-Equality Index.
Global Generics & Biosimilars Award 2019: API supplier of the Year at the 6th Annual Global Generics & Biosimilars Awards.
Winner of Golden Peacock International Award for Sustainability for the year 2019.
Milestones
1984: The birth of a dream
1991: From molecules to affordable medicines
1995: Expanding to reach patients in other countries
2001: Spreading wings globally
2007: Accelerating access to expensive therapies
2010: From medicines to health
2012: Strengthening capabilities
2014: Re-dedicating to patient-centricity
2015: Dr. Reddy’s Laboratories signs commercialization deal with Hatchtech
2016: Dr. Reddy’s completes acquisition of product portfolio from TEVA
2017: Dr. Reddy's expands commercial operations in Europe
2018: Dr. Reddy's Laboratories announces the launch of Tetrabenazine Tablets in the U.S. Market
2019: Dr. Reddy’s Laboratories enters Nutrition Segment with Celevida in India
2020: Dr. Reddy’s Laboratories joins Science Based Targets initiative (SBTi) and sets 2030 GHG emission targets
Company quality is determined using minimum hurdle rate for return on capital employed and free cash flows for last 10 years.
Companies with smaller size have higher hurdle rate.
High quality stocks are important for long term investment.
Value
Valuation is computed by comparing relevant price multiples versus industry and its own history.
One unique and very important modification is our adjustment for company's financials for cyclicality and normalized profitability.
or based on whether current ratio is lower or higher than median values. See graph for better assessment.
Valuation is important for long term investment.
Actual valuation done by our Equity Analysts may differ from the Free DeciZen maker valuation. Subscribe to our premium products for more information on actual valuation
Price
Price rating is given based on stock price strength using moving averages and relative strength on shorter timeframe.
Short term time frame has little to no significance for long term investing but it can help in deciding how fast or how slow one can add a stock top your portfolio.
Only after a stock satisfies Quality and Value parameters, use price trend to build a position. Add slowly if price trend is Red or Orange. Add quickly if price trend is Green.
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MoneyWorks4Me method for rating and ranking mutual funds for SIP
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and
ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the
various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For
this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10
years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when
the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less
than 80%. Funds with less than 5 year data are color-coded Grey.
Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the
company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and
generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous
year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange
(between 8 and 14) and Red (less than 8 out of 20).
Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 20% in Red stocks.
Funds with more than 20% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The
ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number
that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
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