Buy Dr Reddys Laboratories; target of Rs 3239: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com report on Dr Reddys Laboratories (DRL)

"Dr Reddys Laboratories (DRL) is one of the few Indian conglomerates to have adapted well to the changing industry dynamics with special emphasis on research and technology. Promoted by the legendary Dr Anji Reddy, the company has many firsts to its name in the pharmaceuticals space. However, more importantly, it remains one of the best managed Indian companies when it comes to transparency, disclosures and corporate governance. After a roller-coaster ride, mainly due to structural pains in Germany, the company seems to have settled down, thanks to significant traction from the US and, to some extent, Russia. With more focus on technologies rather than therapies, we expect a more stable journey from here on. We are initiating coverage on DRL as the company remains a compelling bet on the US generics play."

"We envisage a fall in share of low margin/high risk segments such as PSAI and European generics (especially Betapharm), going ahead. Thus, growth in FY13-16E is likely to emanate from more productive and sustainable segments such as the US, Russia and India. Similarly, in terms of product offering, we envisage more launches in the fields of injectables, OTC, complex/limited competition products and biosimilars, besides legacy generics. We have ascribed a target price of Rs 3239 based on 20x FY16E EPS of Rs 162. The valuation is in line with Lupin (similar profile) but at a discount to sector leader Sun Pharma (24x). Buy the stock," says ICICIdirect.com research report.

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