5 February 2020 DIVI is almost at the end of significant capacity expansion worth INR17b to cater to the increasing generics business and innovators increased outsourcing. Lower Nutraceutical sales impacted DIVIs 3QFY20 performance; however, we believe that the company is well positioned to benefit from the CRAMS opportunity over the next 4-5 years. We reduce our EPS estimate by 3%/2% for FY20/FY21E, primarily to factor in the reduction in Nutraceutical sales and the higher opex related to compliance. 3QFY20 sales grew a marginal 2.7% YoY to INR14b (v/s est. Gross margin shrank 440bp YoY to 60.8%, largely due to inferior product mix and higher raw material cost. EBITDA margin contracted at lower rate of 380bp YoY to 35.4%.