DRREDDY - Investment Analysis: Buy Signal or Bull Trap?
Last Updated Time : 20 Dec 25, 07:05 am
Back to Investment ListInvestment Rating: 4.0
| Stock Code | DRREDDY | Market Cap | 1,06,833 Cr. | Current Price | 1,280 ₹ | High / Low | 1,406 ₹ |
| Stock P/E | 19.8 | Book Value | 378 ₹ | Dividend Yield | 0.62 % | ROCE | 25.8 % |
| ROE | 20.3 % | Face Value | 1.00 ₹ | DMA 50 | 1,257 ₹ | DMA 200 | 1,252 ₹ |
| Chg in FII Hold | -0.64 % | Chg in DII Hold | 1.26 % | PAT Qtr | 387 Cr. | PAT Prev Qtr | 2,961 Cr. |
| RSI | 59.0 | MACD | 8.51 | Volume | 9,12,456 | Avg Vol 1Wk | 10,17,178 |
| Low price | 1,020 ₹ | High price | 1,406 ₹ | PEG Ratio | 0.40 | Debt to equity | 0.13 |
| 52w Index | 67.4 % | Qtr Profit Var | -79.4 % | EPS | 64.7 ₹ | Industry PE | 30.6 |
📊 Analysis: DRREDDY demonstrates strong fundamentals with ROE at 20.3% and ROCE at 25.8%, both supportive of long-term compounding. Debt-to-equity at 0.13 reflects a healthy balance sheet. EPS at 64.7 ₹ is solid, and valuation is attractive with P/E at 19.8 compared to industry average of 30.6. PEG ratio at 0.40 suggests favorable growth-adjusted valuation. Dividend yield at 0.62% provides modest shareholder returns. Technicals show RSI at 59.0 (neutral to slightly strong), MACD positive (8.51), and price near both 50 DMA (1,257 ₹) and 200 DMA (1,252 ₹), indicating stability. However, quarterly PAT dropped sharply (2,961 Cr. to 387 Cr.), raising concerns about earnings volatility.
💡 Entry Zone: Ideal entry would be in the 1,150–1,250 ₹ range, closer to valuation comfort and DMA support. Current price (1,280 ₹) is slightly above fair entry zone but still reasonable for long-term investors.
📈 Exit Strategy: If already holding, maintain positions for long-term (3–5 years) given strong ROE/ROCE and attractive valuation. Consider partial profit booking near 1,380–1,400 ₹ resistance if earnings volatility persists. Long-term holding is favorable due to strong fundamentals and sector resilience.
Positive
- 📌 Strong ROE (20.3%) and ROCE (25.8%) support compounding potential
- 📌 Attractive valuation: P/E 19.8 vs industry 30.6
- 📌 PEG ratio at 0.40 highlights favorable growth-adjusted valuation
- 📌 Debt-to-equity at 0.13 indicates financial stability
Limitation
- ⚠️ Quarterly PAT decline (-79.4%) raises sustainability concerns
- ⚠️ Dividend yield at 0.62% is modest
- ⚠️ RSI at 59.0 indicates neutral momentum
Company Negative News
- ❌ PAT dropped from 2,961 Cr. to 387 Cr.
- ❌ FII holding decreased (-0.64%)
Company Positive News
- ✅ DII holding increased (+1.26%)
- ✅ EPS at 64.7 ₹ reflects strong profitability
Industry
- 🏦 Industry PE at 30.6, sector moderately valued
- 🏦 Pharma sector remains resilient with global demand tailwinds
Conclusion
🔎 DRREDDY is a strong candidate for long-term investment with robust ROE/ROCE, attractive valuation, and sector resilience. Entry near 1,150–1,250 ₹ offers margin of safety. Existing holders should maintain positions for 3–5 years, targeting exits near 1,380–1,400 ₹ if volatility persists. Long-term compounding potential remains favorable provided earnings stabilize.
Would you like me to extend this into a peer benchmarking overlay comparing DRREDDY against pharma peers like Sun Pharma, Cipla, and Lupin to highlight relative valuation comfort zones?
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