DRREDDY - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.2

📊 Core Financials

• Revenue & Profitability: PAT dropped to 387 Cr. from 2,961 Cr., showing -79.4% quarterly profit variation, though long-term profitability remains strong.
• Margins: ROE at 20.3% and ROCE at 25.8% reflect excellent efficiency and profitability.
• Debt Ratios: Debt-to-equity at 0.13 — low leverage, financially stable.
• Cash Flows: Dividend yield of 0.62% provides modest shareholder returns alongside reinvestment capacity.

💹 Valuation Indicators

• P/E Ratio: 19.8 vs Industry PE of 30.6 — undervalued compared to peers.
• P/B Ratio: Current Price 1,280 ₹ / Book Value 378 ₹ ≈ 3.38, fair valuation.
• PEG Ratio: 0.40 — attractive growth-adjusted valuation.
• Intrinsic Value: Strong fundamentals suggest undervaluation relative to industry peers.

🏢 Business Model & Competitive Advantage

• Operates in pharmaceuticals with global presence in generics, APIs, and specialty medicines.
• Competitive advantage lies in R&D strength, diversified product portfolio, and global distribution.
• Institutional sentiment mixed: FII holdings reduced (-0.64%), while DII holdings increased (+1.26%).

📈 Technical & Entry Zone

• DMA 50: 1,257 ₹ | DMA 200: 1,252 ₹ — stock trading near support levels.
• RSI: 59.0 — neutral zone, not overbought.
• MACD: 8.51 — bullish momentum.
• Entry Zone: Attractive near 1,200–1,250 ₹ for accumulation.
• Long-Term Holding: Strong candidate for long-term portfolio given robust profitability and undervaluation.

✅ Positive

• Excellent ROE (20.3%) and ROCE (25.8%).
• Low debt-to-equity ratio (0.13) ensures financial stability.
• P/E ratio (19.8) below industry average, indicating undervaluation.
• DII holdings increased (+1.26%), reflecting domestic institutional confidence.

⚠️ Limitation

• Quarterly PAT dropped significantly (-79.4%).
• Dividend yield of 0.62% offers modest shareholder returns.
• FII holdings reduced (-0.64%), showing weaker foreign investor sentiment.

📉 Company Negative News

• Sharp decline in quarterly PAT from 2,961 Cr. to 387 Cr.
• Foreign institutional investors reduced stake (-0.64%).

📈 Company Positive News

• DII holdings increased (+1.26%), reflecting strong domestic institutional support.
• Strong operational efficiency with high ROCE and ROE despite profit decline.

🏭 Industry

• Industry PE at 30.6 — sector trades at moderate valuations.
• Pharmaceutical industry benefits from global demand for generics, APIs, and specialty medicines.

🔎 Conclusion

DRREDDY remains a fundamentally strong pharmaceutical company with excellent return ratios, low debt, and global presence. Despite a sharp quarterly profit decline, valuations are attractive compared to industry peers. Entry is advisable near 1,200–1,250 ₹, and it remains a solid long-term holding given its strong fundamentals and industry tailwinds.