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Business Operation Dr. Reddy's Labs a Hyderabad-based global pharmaceutical company, known for research, manufacturing. Operates in 25+ countries, specializes in cardiovascular and oncology drugs. Its Top revenue contributors includes nervous system, gastrointestinal, anti-infective. It 83% Revenue from global generics, 14% from Pharma API, and the rest from proprietary products. Investment Rationale A. Backward Integration Across Product Value Chain. The Pharmaceutical Services and Active Ingredients (PSAI) segment of DRL contributed 12% to its FY2023 revenues. Additionally, the API business not only serves external partners but also provides APIs to DRL's in-house generic operations. This backward integration strategy offers a substantial cost advantage to DRL and bolsters its overall profit margins. Furthermore, DRL has ambitious plans to further backward-integrate more than 70% of its key molecules within the next 4-5 years, ensuring a continued positive impact on its margin profile. B. Strong Products Pipeline to Steer growth for Next 4-5 years. In FY2023, Dr. Reddy's has strategically built a robust portfolio for upcoming launches. They have submitted 85 ANDA filings to the US FDA, with 43 of them under Para IV and an additional 17 anticipated to be granted First-to-File (FTF) status. This extensive pipeline consists of 54% complex generics, which are expected to drive growth over the next 4-5 years. Looking ahead to FY24, they plan to introduce 25-30 new products, including injectables, to further propel their growth trajectory. C. USA Sales Rebound and Got Traction in Q2FY24. Dr. Reddy's reported strong growth in the US during Q2FY24, with a 12% YoY increase in US revenue, reaching US$384 million. This growth was driven by their core portfolio, increased gRevlimid sales, Mayne integration, and favorable forex rates, despite some price erosion. However, they experienced a slight 1.9% QoQ decline, primarily due to price erosion. In Q2FY24, the company launched four new products, with plans for 25-30 more material launches. They anticipate a US revenue CAGR of 10.8% for FY23-26E, including gRevlimid sales and new launches. D. Outlook And Recommendation. We model a Revenue/PAT CAGR of 16%/15.1% and estimate DRREDDY to clock PAT of Rs 5975 Cr by FY25E. DRREDDY is trading at forward PER (x) of 14.9 (Sharp discount to historical median of 25x) and we value at 17.7(x) FY25E and Recommend BUY on DRREDDY with Target Price of Rs. 6163.

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