Sharekhan upgrades Divi's Labs to 'Buy' on strong FY26-28 growth visibility

Domestic brokerage Sharekhan has upgraded pharmaceutical company Divis Laboratories to ‘Buy’ and revised its target price to ₹7,375 on the back of accelerating momentum in the company’s custom synthesis (CS) business, strong execution in complex chemistry platforms, and improving margin trends. 

 

The brokerage said Divis Laboratories is entering a stronger growth phase, supported by a robust H2FY26 pipeline and visibility for scale-up over the next two years.

 

Meanwhile, on the bourses, Divi’s Laboratories share price rose up to 0.46 per cent to an intraday high of ₹6,322 per share. Around 10:20 AM, Divi’s share price continued to trade at day’s high level. In comparison, BSE Sensex was trading 0.09 per cent higher at 84,471.24 levels.

 

According to the note dated December 10, 2025, Divis’ custom synthesis segment is showing strong traction, with multiple projects moving into validation and commercialisation stages within one to two years. Engagement with global innovators remains high, aided by steady inflows of RFPs, site visits, and progress on Phase I-III programmes. Sharekhan highlighted that three major long-term CS contracts are positioned to ramp up 12-24 months after regulatory approvals. Expansion of platforms such as flow chemistry, biocatalysis, and peptide synthesis further strengthens the outlook.

 

The brokerage noted that Divis’ backward integration continues to boost supply security and cost efficiencies, while peptide fragments offer medium-term revenue visibility. Although generic active pharmaceutical ingredients (APIs) face pricing pressure in the near term, Sharekhan expects a recovery driven by stable volumes and post-patent opportunities. Management commentary remains upbeat, supported by a favourable mix, disciplined capex, and strong customer engagement.

 

Divis also benefits from a consistent regulatory track record across agencies such as the USFDA and EMA, enabling it to secure long-term contracts with global clients, analysts said. The company derives more than 85 per cent of its revenue from regulated markets in the US, Europe, and Japan, with Europe and the US contributing 74 per cent. Its portfolio of over 150 patents supports non-infringing chemistry for high-value molecules across antivirals, cardiology, and nutraceuticals. A debt-free balance sheet and an R&D team of more than 600 scientists reinforce its leadership in custom synthesis, where it holds an estimated 5-7 per cent global share.

 

Sharekhan pointed to a strong Q2FY26 performance. Net sales rose 16.1 per cent year-on-year to ₹2,715 crore, driven by specialty chemicals, complex molecules, and generics. Exports accounted for 90 per cent of revenue, underscoring the company’s global positioning. Gross margins improved to 37.75 per cent, while operating margin expanded 209 basis points to 32.71 per cent. PAT margin climbed to 25.38 per cent, aided by higher forex gains and controlled costs. The quarter marked record highs for sales, operating profit, PAT, and EPS.

 

Rolling valuations to FY28E, Sharekhan values the stock at 51x FY28 EPS of ₹144.6 to arrive at its ₹7,375 target. Key risks, analysts said, include regulatory changes and forex volatility. 

Disclaimer: The stock target/outlook has been suggested by Sharekhan. Views expressed are their own.