Divi's Laboratories Ltd. share price target

Divi's Laboratories (DIVI) Q4FY25 EBITDA beat our estimates led by higher gross margin (62%; up 200 bps QoQ). We expect GMs to sustain, led by better product mix and stable raw material prices. Mgmt. suggested that moderation of raw material prices, increasing RFP's and commencement of some CDMO and contrast media contracts, will continue to aid revenues and margins. Our FY26E/FY27E EPS estimates broadly remain unchanged. We expect 22% EBITDA CAGR and 15% PAT CAGR over FY25-27E. At CMP, stock is trading at...

DIVISLAB revenue beat our estimates (+3.9%) due to strong growth in Custom Synthesis segment. EBITDA beat our estimates due to better-than-expected gross profit and lower than expected employee expenses. Adj. PAT was beat due to lower-than-expected effective tax rate.

Q3 sales/EBITDA/PAT were 0.6%/7.5%/22.3% above our estimates. PAT was higher than estimated due to the adoption of the new tax regime

Divi’s Laboratories (DIVI) delivered in-line revenue. However, it reported better-than-expected EBITDA/PAT led by a better product mix and lower tax rate (due to the shift to a new tax regime).

Divis Labs’ revenue for the quarter amounted to Rs. 2,238 crore, marking a 17% y-o-y increase and a 6% q-o-q rise, which was 4% above estimates.

Divis Lab revenue beat our estimates significantly due to strong growth in the Custom Synthesis segment. EBITDA beat our estimate due to lower-than-expected other expenses and employee expenses.

DIVI reported healthy 2QFY25 earnings which was a beat on our estimates. Exports contributed 87% of sales and the US 71%

DIVISLAB continues to post results below estimates due to continued weakness in generic pricing. We hence cut down our EPS estimates by 3% each for FY25E/FY26E.

Divi’s Laboratories’ (Divi’s) Q1FY25 result was sub-par. Revenue traction was driven by custom synthesis (CS) (up ~46% YoY), while generics grew 1.5% YoY due to double-digit price erosion in key products like Naproxen, Gabapentin and Dexamethasone.

The likely beginning of supply of newly going off patent product’s APIs, ramp up in contrast media and Sartan products’ generic APIs as well as in the ongoing custom synthesis projects will fuel improved margins over short – long term.
The new supply agreement with an MNC client and peptide ingredients opportunity present ample scope for valuation multiple expansion in the medium term.

DIVI delivered a strong quarter with all round beat. EBITDA/PAT beat Bloomberg consensus estimate by 20% each

We believe Divi’s Labs Ltd. (DIVISLAB) has strong growth engines ahead to augment its growth and profitability over FY23-FY26E. During FY22-FY24E, it has been validating existing generic contrast media APIs and Sartan products with new set of potential customers as well as novel MRI API with innovator pharma company.

LICI: Solid quarter; valuations overdone cut to HOLD. ALKEM: Good quarter; cut to SELL on stretched valuations. Monthly Chartbook: Fiscal consolidation to hold key. PWGR: In-line quarter, FY25 capex hiked; maintain BUY. TATACONS: Strong run continues. DIVI: Healthy margin recovery, heady valuations. TPW: Dull quarter; high valuations maintain HOLD. ESCORTS: Weakness persists - maintain SELL. TRCL: Tepid quarter, high capex overhang retain SELL. Metals & Mining: Ferrous read-across: Steel recovery in CY24 - ArcelorMittal