Divi's Laboratories Ltd. share price target

While Divis reported 11% YoY decline in Q2 revenue (19% YoY decline in Q1), it exhibited 8% QoQ growth as most plant protocols and procedures (leading to manufacturing disruption) suggested in remediation plan were completed in Q1.

On the back of the regulatory relief, we have increased our EPS estimates for FY18E/FY19E/FY20E by ~9%/14%/14%. We also upgrade the earnings multiple from 16x previously, to 22x, in-line with DIVI's historical 1-year forward multiple. However, with the recent run-up in the stock price, there is limited up-side. Maintain NEUTRAL, with a revised TP of Rs 1,100 (22x Sep-19E). The US FDA has lifted the 66-40 import alert on Divis Labs (DIVI) crucial Unit 2 facility in Vizag. DIVI has managed this within 8 months, a record for Indian players. It has traditionally taken peers 2 to 3 years to resolve issues of a similar scale at US FDA-approved facilities, hence this news is extremely positive, and speaks volumes of managements ability and execution.

ICICI Securities Ltd | Retail Equity Research Revenues declined 12% YoY to | 890 crore (I-direct estimate: | 959 crore), mainly due to loss of sales and delays of export shipments of...

Divi's Laboratories (DIVI) announced that the US FDA will lift the import alert under clause 66-32 at the Vishakhapatnam-based Unit-2 facility. Exposure to the US market from Unit-2 stands at ~22% of total sales (pre-import alert). This has been one of the fastest resolutions post receipt of the import alert in Mar17. Import alert under clause 99-32 was lifted in Jul-17: In July-17, the US FDA lifted the import alert under clause 99-32 on the company's Unit-2 at Visakhapatnam. The FDA had issued an import alert under clauses 99-32 and 66-40 in March 2017 and a warning letter in May 2017 for the Vishakhapatnam...

We maintain NEUTRAL rating on the stock, with a revised TP of Rs 700 (16x Sep-19E). Divis Labs (DIVI) reported a muted performance in 2QFY18. Revenue for the quarter was Rs 8.9bn, (~4% below estimates), a decline of ~11% YoY, with the impact of the import alert continuing to be felt. Supply protocols for a plant under an import alert have resulted in slower output for DIVI. EBITDA came in at ~Rs 2.8bn, a margin of 31.1% (in-line with estimates). However, contrary to our expectations, there continued to be remediation costs during this quarter (~Rs 170mn), adjusted for which, the EBITDA margin would be ~33%, a ~190bps beat. PAT was ~Rs 2bn (down ~8% YoY), ~5% below estimates.

~INR170m related to the import alert at Unit II. PAT of INR2.1b (down ~32% YoY) was ~4% below our estimate. Remediation over at Unit-2: DIVI has already completed remediation for observations highlighted by the USFDA in a re-inspection. Management too has met the USFDA in late Oct-17. The company believes that till the import alert resolution does not happen, the sales run-rate will remain at 2Q levels. Capex plan: DIVI spent ~INR4.5b as capital work in progress till end-FY17 to expand capacity at Unit-1 and 2. The company plans to spend ~INR3.65b in...

Event - USFDA to lift Import Alert 66-40 and close out warning letter: USFDA has informed Divis Laboratories (Divis) that it will be lifting Import Alert 66-40 and close out the warning letter at unit-2 at Vishakhapatnam, which was re-inspected in September 2017 and was issued fresh Form 483 with six observations (the...

We are positively surprised on fast remediation by Divi's followed by quick USFDA re-inspection. Form 483 observations issued in Dec 16 on Unit 2 facility (under Import Alert) have been confirmed as completed and resolved (EIR awaited) after USFDA re-inspection.

Q1 revenue declined 19% YoY to Rs 8.2 bn (~14% below estimate) as export shipments were impacted due to setting up of revised protocols as stipulated in the import alert by the USFDA. As per the management, the protocols have now been established; expects normalcy from Q2. Divis guides for flat cc r..

Revenue decreased by 23.01% to Rs. 821.2 Cr in Q1FY18 when compared to the previous quarter. Revenue decreased by 23.01% to Rs. 821.2 Cr in Q1FY18 when compared to the previous quarter.