Divi's Laboratories Ltd. share price target

Revenues and margins outperform: Divis Lab's Net revenues increased by 29.4% YoY to Rs 13.4 bn, which is higher than our estimates of Rs 10.4 bn for the quarter.

DIVIs reported strong revenue growth of ~29% YoY to INR13.4b v/s our est. of INR12.2b, partly due to low base of last year. Gross margin expanded ~360bp YoY (+110bp QoQ) to 64.2%. EBITDA margin improved significantly by ~600bp YoY to 39% due to improvement in gross margin and better operating leverage. Employee cost 2 February 2019 increased at a lower rate of 19% YoY to INR1.4b, and other expenses remained stable at INR1.6b. Revenue growth coupled with margin expansion led to ~53% YoY growth in EBITDA to INR5.2b v/s our est.

Revenues and margins outperform: Divis Labs Net revenues increased by 44.4% YoY to Rs 12.9 bn, which ishigher than our estimates of Rs 10.2 bn for the quarter. The Operatingmargins were at 40% in Q2FY19 (much higher than our estimate of 34.7%) asagainst 31% in Q2FY18 on account of better gross margin and lowerexpenditure.

Downgrade to SELL with a TP of Rs 1,345 (22x Sep-20E EPS). Divis Labs (DIVI) reported a blowout quarter, benefitting from a favorable base, currency impact, one time API opportunities and a belated surge of orders post import alert clearance. Revenues grew up 44/29% YoY/QoQ to Rs 12.85bn, EBITDA margin at 40% expanded 887bps, while PAT jumped 92% YoY to Rs 3.98bn. Margin expansion was led by currency benefits and oplev.

Revenues grew 44.3% YoY to | 1285 crore against I-direct estimate of | 1012.4 crore led by 1) capacity addition, 2) advantage of supply constraints from China and 3) currency tailwinds EBITDA margins rose 887 bps to 40.0% (I-direct estimate: 36.0%) mainly due to currency tailwinds, operational leverage. EBITDA grew 85.5% YoY to | 514.1 crore (I-direct estimate: | 364.5 crore) Net profit grew 92.3% to | 397.7 crore (I-direct estimate: | 275.1...

significantly by ~44% YoY to INR12.9b (v/s est. The strong YoY growth was led by (a) normalization of operations post resolution of warning letter, and (b) opportunities due to slowdown in supplies from Chinese competitors. Superior product mix led gross margins to expand by 29 October 2018 ~330bp YoY (+150bp QoQ) to 63%. In addition, improved operating leverage with higher capacity utilization led EBITDA margin to expand ~890bp YoY to 40%. This is the highest margin recorded by the company in the last 18 quarters. Revenue growth coupled with margin expansion led to ~86% YoY growth in EBITDA to INR5.1b (v/s est. Other income saw forex gains of INR528m against INR106m YoY. PAT stood at INR4b up ~92% YoY at INR8.7b (+66% YoY) and PAT at INR6.

Rupee reset pushes up estimates: In the past five months, rupee has depreciated by 10-11%, benefitting exporting pharma companies in terms of better sales realisation and profitability. Hence, we have revised our INR assumptions to Rs. 69 vs. earlier Rs. 67 (for FY2020E and FY2021E), leading to upgrade of 2-3% each in our sales and earnings estimates (FY2020E and...

Maintain NEUTRAL rating, with a revised TP of Rs 1,150 (22x FY20E). 1QFY19 is a seasonally weak quarter for Divis Lab, but on a lower base of last year which was affected by import alert, the YoY expectations were higher. The top-line came in at Rs 10bn (in-line), up ~21%YoY (down 9% QoQ). Strong growth in the generics (+26% YoY) and nutraceuticals businesses (+61%YoY) boosted the top-line.

ICICI Securities Ltd | Retail Equity Research Revenues grew 21.2% YoY to | 995.3 crore (I-direct estimate: | 1151.2 crore) mainly due to lower base of import alert in Q1FY18, currency tailwinds and strong growth in the carotenoid segment EBITDA margins improved 554 bps to 35.4% (I-direct estimate: 36%) mainly due to strong gross margins, lower other expenditure. EBITDA grew 43.7% YoY to | 351.9 crore (I-direct estimate: | 414.4 crore) Net profit grew 50.8% to | 266.2 crore (I-direct estimate: | 308.1...

4 August 2018 revenue grew 21% YoY to INR10b (our estimate of INR10.5b). The strong YoY growth came partly on the back of last years low base. The business slowdown at Unit-I due to compliance-related activities during the quarter impacted the growth to some extent. Gross margin expanded by ~200bp YoY to 62%, but contracted by ~100bp QoQ due to change in product mix, higher prices of solvents on account of hike in crude oil prices and increase in prices of key starting material procured from China. EBITDA margin improved more sharply than gross margin by 554bp YoY to 35.4% for the quarter, driven largely by a reduction in costs related to remediation measures. Other expenses, as a percentage of sales, declined from 18.2% in 1QFY18 to 14.1% in 1QFY19. EBITDA grew 43.7% YoY to INR3.5b (our estimate of INR3.7b). PAT growth at 39% YoY was higher than EBITDA growth, led by forex gain of INR270m.