Dr. Reddy's Laboratories Limited Valuation
DRREDDY · Healthcare · Current price ₹1,233
Is Dr. Reddy's Laboratories Limited undervalued?
We estimate the fair value of Dr. Reddy's Laboratories Limited at ₹1,660 per share, against a market price of ₹1,166. That puts the share price about +42.4% below our estimate, at low confidence. This is our view of what the business is worth, not a target price or a forecast of where the share price will go.
How this fair value is calculated
This estimate comes from 2 methods: Discounted cash flow (2-stage) (₹425), Fair multiple (P/E) (₹2,896). These methods disagree materially, so the estimate is their midpoint rather than a weighted blend, and the disagreement is part of the finding. The full working, including the assumptions and what data was missing, is set out below.
The range around this estimate
Our estimate for Dr. Reddy's Laboratories Limited spans ₹830 to ₹2,896. That range is wide, which is the honest signal here: read the range rather than the single number. A margin of safety means buying meaningfully below the estimate: the wider the range, the more room the assumptions leave for error.
Valuation multiples
Dr. Reddy's Laboratories Limited trades at a P/E of 24.5x and a P/B of 2.5x, with a dividend yield of 0.7%. Multiples are most useful compared against the company's own history and its sector peers — see the peer comparison for context.
How we got this fair value
Every number below is part of the same estimate for Dr. Reddy's Laboratories Limited. Nothing here is a target price or a forecast of where the share price will go.
The inputs are thin or the models disagree sharply. This is our least reliable kind of estimate, so read the range rather than the single number.
Estimate range ₹830 – ₹2,896
Why this method for this business
Dr. Reddy's is an asset-light compounder with a durable moat, making DCF and relative PE the most appropriate models. EV/EBITDA is less relevant due to the company's strong cash flow generation and low leverage.
The models behind the number
These methods disagree materially, so the estimate is their plain midpoint rather than a weighted blend. The disagreement is itself the finding.
Intrinsic value from 2-stage discounted cash flows (primary for asset-light / normal businesses); FCFE path
- ev_ebitda is less suitable for a high-quality, asset-light pharmaceutical company with strong cash flows and a durable moat.
What was missing
- Lack of forward EPS estimates for 2027
- Limited analyst coverage for precise multiple normalization
What drives it
28 inputs, grouped by how strong each claim is
- FCF_0 (normalized)
- 1,944 ₹cr
- Net debt
- 7,734 ₹cr
- Sector-median P/E
- 36.65×
- Peers used
- 18
- EPS (TTM)
- 38.61 ₹/share
- Own-history median P/E
- 92.09×
fcf_norm (median ≤5y positive)
gross debt (cash n/a)
peer-median
peer-median
computed
reconstructed (one feature, dampened — not a cap)
- Discount rate (r)
- 13.28%
- Beta
- 0.85
COE (building-block)
bottom-up industry
- Stage-1 start growth
- 14%
- Fade shape
- linear
- Terminal growth (g)
- 5.41%
- Stage-1 years
- 9 y
pat_cagr_5y
lifecycle Mature
macro terminal × quality premium
lifecycle Mature horizon
- Lifecycle stage
- Mature
- Quality premium
- 1.082×
- Anchor correction
- peer anchor 36.6x diverges 2.5x from 7yr own-history 92.1x (no size-comparable peer) — anchor blended 0.6 toward own-history → 69.9x
- Term: quality
- +2.8%
- Term: growth
- +24.8%
- Term: capital_allocation
- +13.6%
- Term: financial_strength
- +8.2%
- Term: history
- +9.5%
- Term: sector_rerating
- +0.0%
- Term: rate_regime
- +1.2%
- Term: risk
- +0.0%
forecast engine (L20)
moat Narrow + capital allocation
peer-anchor mismatch — deep own-history used instead
quality 61/100 (high, stable returns) → premium
durable ~14% CAGR (ROCE 14% > hurdle) → premium
capital allocation: rising ROCE funded by strong FCF → premium
financial strength: low leverage (D/E 0.2) → mild premium
history: market paid +32% vs sector, dampened ×0.3 (one feature, not the anchor)
sector re-rating: no sector-norm history → not used
rates: risk-free 6.9% below ~7.1% normal → higher multiple
risk: no analyst-dispersion signal available → neutral (lowers confidence, not PE)
- Path
- FCFE
- Terminal-value fraction
- 0.549
- Premium vs sector
- +7.3%
- Fair-multiple confidence
- 87%
- Fair P/E
- 75×
computed (D/E vs 0.8)
PV_TV / (PV_1+PV_TV)
fundamentals + macro (not capped at own history)
data completeness + term agreement
sector median × ∏(1+term) — Dynamic Fair Multiple
Who computed this
A language model (qwen3:8b) selects the valuation method and the judgement inputs for Dr. Reddy's Laboratories Limited: which models suit the business, the moat, the growth and margin assumptions. It does not produce the number. The fair value itself is computed in Python by a deterministic engine (version 2026.08.1) from those inputs, so the same inputs always give the same result and every figure above can be traced to a source.
Estimated 14 Sept 2026. Re-run as new financials and news arrive.
How we value stocks
We estimate what a business is worth from its own economics: cash flows, returns on capital, and a multiple justified by its quality, rather than from where the share price has been. A fair value estimate is a view, not a verdict, and it is only as good as the inputs listed above.
Read the full fair-value methodologyUnderstand the ratios
More on Dr. Reddy's Laboratories Limited
DocStoX estimates are computed from reported financials, for informational purposes only, not investment advice. Consult a SEBI-registered advisor before investing.