Divis Labs Q2 Preview: Net profit may jump 36%, revenue by 15 YoY%

Indian pharmaceutical giant Divis Labs is scheduled to post its financial results for the second quarter (July-September) of fiscal year 2024-25 (Q2FY25) on Friday, November 8. 

 

Brokerages expect Divis Labs to report a robust quarter on a year-on-year basis and sequentially. The company will likely record healthy sales led by API segment, and custom synthesis manufacturing (CSM) segment. 

 

According to brokerages tracked by Business Standard, Divis Labs is expected to report an average net profit Rs 474 crore in Q2FY25, a rise of 36.2 per cent year-on-year (Y-o-Y) against Rs 348 crore in Q2FY24. Meanwhile profits may increase by 23.5 per cent quarter-on -quarter, compared with a profit after tax (PAT) of Rs 430 in the June quarter of FY25. 

 

Divis Labs’s average revenue will potentially increase 15.2 per cent Y-o-Y to Rs 2,199 crore as against Rs 1,919 crore in Q2FY24. On a quarterly basis, the revenues may rise by 3.6 per cent. The pharma company registered revenues of Rs 2,118 crore in the June quarter of FY25. 

 

Moreover, here’s what key brokerages expect from Divis Labs Q2 results:

 

Kotak Institutional Equities: KIE analysts expect Divi's Laboratories to report a 9 per cent year-on-year growth (+14 per cent quarter-on-quarter) in its generic APIs segment for 2QFY25. The CSM (custom synthesis manufacturing) segment is anticipated to grow by 52 per cent year-on-year (+12 per cent Q-o-Q) in Q2FY25, driven by higher supplies from one of the two major projects commercialised in 3QFY24. 

 

In contrast, the nutraceuticals segment is expected to decline by 4 per cent year-on-year for the quarter. Overall, the analysts project Divi's to report a 25 per cent year-on-year growth in sales (+13 per cent quarter-on-quarter) for 2QFY25.

 

Ebitda is expected to grow by 57 per cent year-on-year to Rs 750 crore, with Ebitda margin expanding by 650 basis points Y-o-Y to 31.6 per cent.

 

Nuvama Institutional Equities: Nuvama analysts expect Divi's Laboratories to report a 17 per cent year-on-year revenue growth, driven by strong performance in Sacubitril/Valsartan. Ebitda is projected to grow by 40 per cent year-on-year, with margins reaching 30.1 per cent. PAT is anticipated to grow by 33 per cent year-on-year.

 

PhillipCapital: PhillipCapital analysts note that the moderating supply of Sacubitril/Valsartan, along with visible trade challenges affecting generic exports despite over 20 per cent year-on-year growth in custom synthesis, is leading to muted sales growth. 

 

However, with an improved product mix towards custom synthesis and softening input costs, margins are expected to expand by 310 basis points year-on-year to 28.2 per cent, resulting in a 14 per cent year-on-year growth in Ebitda. Sequential performance, however, is impacted by trade challenges. PAT is expected to rise by 13 per cent year-on-year, supported by the improved product mix, though it may decline by 11 per cent quarter-on-quarter.

 

BNP Paribas: BNP Paribas analysts expect revenue growth to be primarily driven by new projects in the custom synthesis segment, while the generics segment is likely to remain muted. They anticipate that the margin profile will remain volatile, although there could be some year-on-year improvement.