Divi's Laboratories Ltd. share price target

Revenues grew 13% YoY to INR19.6b (our est: INR19.9b) for the quarter. The gross margin expanded 420bp YoY to 67.2%. This was largely owing to a superior product mix and lower raw material costs. The EBITDA margin expanded at a lower rate of 300bp YoY to 43.5% (our est: 40.9%) due to higher employee costs (+60bps as a percentage of sales) and other expenses (+60bps as a percentage of sales) EBITDA was up 22% to INR8.5b (our est: INR8.1b) for the quarter YoY. Adjusted for INR196m in forex gains, PAT grew at a lower rate of 13% YoY to...

DIVI delivered in line 4QFY21 earnings. It ended FY21 on a strong note, with 29%/57%/54% YoY growth in sales/EBITDA/PAT. New product development, ongoing capex, and strong prospects in Custom Synthesis (CS) provides...

Divi's Labs (DIVI), in addition to having a robust base business, is enhancing its product offerings in the generic API space at least sixteen molecules are under various phases of development and in the subsequent DMF filing stage. Particularly, we find DIVI's work interesting in the Contrast Media segment. While there is complexity associated with Iodine-based products, DIVI's strong chemistry skill set and experience in the Contrast Media space have enabled it to bring the Iohexol API to the validation phase. We believe DIVI is well-placed to capitalize on the carotenoid opportunity, with a...

The growth was driven across generic APIs and CRAMS businesses. Strong positioning of divis will help in monetizing the growth opportunity in API and CRAMS space given its stellar execution track record and being one of the preferred suppliers. Further, recently done and...

Divi's Laboratories Limited is engaged in the manufacturing and selling of generic active pharmaceutical ingredients (APIs) and intermediates in the United States, Asia and Europe. Its manufacturing and research and...

Divi's Labs (DIVI) reported in-line 3QFY21 earnings. This was led by healthy traction in Generics / Custom Synthesis (CS), coupled with lower raw material cost, driven by process improvements. Meaningful benefit is yet to accrue from the major capex phase. 10 new molecules under development in generic APIs and contrast media APIs would provide a fillip going forward. We maintain our earnings estimate for FY21/FY22/FY23 and roll forward our Target Price to INR4,530, valuing DIVI at 36x 12M forward earnings. We remain positive on DIVI on the back of a) sustained volume growth in the...

The company remains committed to a few research driven niche opportunities as was the case when it started commercial operations. Two generics, Naproxen (pain management) and Dextromethorphan (cough suppressant) account for ~26% of overall revenues. Divi's enjoys ~70% global market share in these two products. Divi's is also increasing its presence in another niche area of carotenoids after acquiring requisite capabilities. It has developed various types of carotenoids including betacarotene. Recent supply constraints from China are likely to propel growth in this segment. With focus on brownfield expansion, the management is...

More than strong half-yearly performance (the management stresses that in a business like this can be lumpy) important narrative for Divi's is unprecedented capex to further augment capacities besides preparing for growing opportunities arising due to China plus one factor. It has earmarked an aggressive capex of ~| 3700 crore [| 1800 (existing plans) + | 400 (custom synthesis blocks) + | 1500 (greenfield Kakinada plant) crore], over and above ~| 2000 crore spent in last five years. Divi's remains a quintessential play on the Indian API/CRAMs segment with its product...