Company Update - Divi's Laboratories - ICICI Direct

Revenues grew 33.4% YoY to Rs. 3480 crore in H1FY21. Generic segment grew 38.6% YoY to Rs. 1777 crore. Custom synthesis grew 31.8% YoY to Rs. 1409 crore. Carotenoids grew 14.0% YoY to Rs. 294 crore. EBITDA margins expanded 777 bps YoY to 41.4% due to significantly better gross margin performance and lower other expenditure. Subsequently, EBITDA grew 64.2% YoY to Rs. 1441 crore. Net profit grew 60.8% YoY to Rs. 1012 crore in-line with a strong operational performance.

Valuations & Outlook

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 ~Rs. 3700 crore [Rs. 1800 (existing plans) + Rs. 400 (custom synthesis blocks) + Rs. 1500 (greenfield Kakinada plant) crore], over and above ~Rs. 2000 crore spent in last five years. Divi's remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess. We maintain BUY with a target price of Rs. 4425 based on 40x FY23E EPS of Rs. 110.6.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_DivisLab_CoUpdate_Dec20.pdf

Shares of DIVI'S LABORATORIES LTD. was last trading in BSE at Rs.3792.8 as compared to the previous close of Rs. 3787.6. The total number of shares traded during the day was 19388 in over 1718 trades.

The stock hit an intraday high of Rs. 3812 and intraday low of 3761.55. The net turnover during the day was Rs. 73454070.

Source : Equity Bulls

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