Dr. Reddy’s Lab stock: Significant growth ahead (NYSE:RDY)

Vaccine manufacturing process, production of Kovid-19 vaccine.  biology


investment thesis

Dr Reddy’s Laboratories Limited (NYSE:RDY) is an Indian multinational pharmaceutical company headquartered in Hyderabad, India. In this thesis, I will mainly analyze several drugs launched by the company in the US market. I will also analyze the risk Faced by the company and its valuation at current price levels. I provide a hold rating for RDY taking into account all growth and risk factors.

Company Overview

Dr. Reddy’s Laboratories Limited is a multinational pharmaceutical company with operations in more than 65 countries. The company operates through pharmaceutical services and active ingredients (PSAI), proprietary products, global generics and other segments. Its PSAI segment manufactures and sells active pharmaceutical ingredients and intermediates, which are used as raw materials in other finished goods. Additionally, PSAI is also involved in segment contract research services, and manufactures and markets active pharmaceutical ingredients and steroids as per specific customer requirements. The company’s global generics segment produces and sells prescription and over-the-counter pharmaceutical finished products, which are marketed either under a single brand name or as the final generic dosage form of the clinically branded formulation. are equivalent. In addition, this division serves the biology industry. The company’s proprietary products segment is focused on the research and development of differentiated formulations. The other section works on cancer and inflammatory drug development.

multiple product launches

RDY is known for continuous innovations in the market. The company has recently launched several drugs in the US market, which is expected to see significant growth in the near future.

Bortezomib Launch in the US: RDY, on 27 July 2022, announced After getting approval from the US Food and Drug Administration (USFDA) launched its drug Bortezomib in the US market. This drug is a generic equivalent of Takeda Pharmaceutical’s (So) Velcade Injection. RDY has launched its drug bortezomib for injection of 3.5 mg per 10 mL single-dose vial presentation for subcutaneous (SQ) or intravenous (IV) use. This drug is at the core of the treatment of myeloma, a malignant tumor of the bone marrow. To measure the scale of the launch of this drug, let us look at the sales of the drug Velcad in the US market. The drug was Velcade by Takeda Pharmaceutical Recorded $1.2 billion in sales In the 12 months ending May 2022. RDY has a great opportunity with the launch of this drug in the US market.

Generic medicines for allergies launched in US RDY, on 22nd July 2022, announced The launch of over-the-counter (OTC) fexofenadine HCl 180 mg and pseudoephedrine HCl 240 mg extended-release tablets following approval from the US Food and Drug Administration (USFDA). These drugs are the store-brand equivalent of Allegra-D 24HR in the US. These medicines mainly address nasal and sinus congestion due to cold or allergies. According to IRI, the sales of Allegra-D24 HR in the US market for the 12-month period ended May 2022 are $45 million.

Mark Kikuchi, CEO, North America Generics, Dr. Reddy’s Laboratories, said:

Dr Reddy’s Fexofenadine HCl 180 mg and Pseudoephedrine HCl 240 mg Extended Release Tablets, USP, is a significant addition to our upper respiratory portfolio of OTC products, this first-to-market launch is a testament to our deep capabilities and our ability to benefit our customers and patients. Continuing to bring you high quality, affordable store-brand alternatives.

The company has also announced to launch several drugs in the month of June and May. These drug launches give the company an innovative product mix over a period of time. Furthermore, they are the primary growth driving factor for the company by expanding existing product lines along with expansion into various pharmaceutical sectors. I believe the company will benefit greatly from the launch of these products in the coming years, but at current price levels it is worth a lot, and it is advisable not to take any new positions in the stock. I recommend waiting for a price correction in the stock before initiating a buy position.

major risk factors

Commodity Price Volatility: The purchase and sale of a company’s active pharmaceutical ingredients, such as the raw material components for these active pharmaceutical ingredients, are the primary source of exposure to market risk in relation to commodity prices. The availability of raw materials has a significant impact on trade. These are commodity products, and their cost can change significantly in a short period of time. Although the cost of raw materials used in a company’s active pharmaceutical ingredients business is typically more variable, raw material prices generally change in line with commodity cycles. Most of the company’s operating expenses are related to the cost of raw materials. Hence a sharp rise in commodity prices may adversely affect the operating profits of the company.


Recently, the company has launched several drugs majorly in the US. I think it is too early to predict the impact of these launches on the company’s financials. I’m keeping a conservative estimate, and I’ll update my estimates once I’m certain about the impact of the launch on financials in the coming quarters. The launch is a big growth catalyst in the long term, but I’d wait a quarter or two to get a clearer picture of the financial impact of the event.

The company is currently trading at $51.50 with a market capitalization of $8.56 billion. The company’s current trailing PE multiplier is 29.49x. I estimate FY2022 EPS to be $2.42, giving a leading PE multiplier of 21.62x. I believe the company is well valued at current price levels, and the solid growth anticipated due to recent launches is a good reason to hold the stock for the long term, but to take any new positions. It is advisable to wait for the price correction before. inventory.

quantity rating

looking for alpha

of the company Quantity Rating and Factor Grade Seeking Alpha aligns perfectly with my investment thesis and fundamental assessment. According to looking for alpha Quant rating is the hold rating of the company. The company has a C- in valuation, which supports my hold rating, and a B+ in its growth, which aligns with future growth. The company has A- in profitability, B- in momentum, and C- in revision. After considering all these factors I believe the valuation of the company is not attractive.


Recently, the company has launched various drugs, creating substantial growth potential, but as per the PE valuation metric, the company is quite valuable. After considering the current stock price and the company’s growth factors, I believe its valuation is not attractive enough to create a new position. Therefore, I provide the hold rating for the RDY.

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