On the account of robust sales, the drug firm Divi’s Laboratory reported a rise in consolidated net profit of 45.63 percent to Rs. 519.59 crore for the second quarter. On November 9, the price of Divis Laboratories jumped over 4 percent after the September quarter profit numbers.
Divi’s Laboratories in a filing to BSE said the company posted a net profit of 356.78 crores for the corresponding period of the previous fiscal period. Additionally, the company’s total income was Rs. 1,762.94 crores versus 1,492.60 crores for the last year’s quarter.
Global research firm Jefferies upgraded the stock to buy and raise the target to Rs 3,772 from Rs 3,159 per share. The company upgraded its estimation for FY21/FY22 EPS by 14 percent each respectively.
Macquarie continuously outperforms its rating on Divis Labs with a target of Rs 3,910 per share.
The new CapEx of Rs 400 crore and resolution of Kakinada Logjam strengthen growth outlook adding, that is, well placed to accept opportunities from higher pharma outsourcing to India. The company is attracting pharma outsourcing tailwinds for CRAMS and API segments. The announcement of Divi’s Laboratories’ additional capital expenditure has increased the morale of the investors.
The analysts at Philip Capital in a client note said, “The new capacity additions practically have eliminated our medium concern of capacity constraints (emerging from recent robust growth momentum) and provide strong growth visibility over the next five years.”
Divi’s revenue growth of 21% year-on-year is good due to the rise in outsourcing, and better capacity utilization. Moreover, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) has also expanded due to lower costs and improved mix in gross margins. EBITDA margins expanded 800 basis points year-on-year in the second quarter.
The stock price gains of about 83% may reflect the revised earning in 2020 plus, the analyst has revised earnings by 10% for the financial year 2022. At the current time, the trade at a price-earnings multifold 33 times FY22 earnings, making the valuation quite lucrative.