Higher raw material costs, adverse product mix weigh on Divi's Labs

Higher raw material costs fuelled by the rising Chinese chemical prices were the major reason for margins disappointment

Divi’s Laboratories' March quarter results did not meet the Street’s expectations, leading to a sharp 9.5 per cent correction in the stock on Monday. Though the company’s revenues grew 15.5 per cent year-on-year, they were lower than the Street’s estimates.  

The bigger disappointment came on the profitability front with operating profit margins declining 60 basis points to 34.9 per cent. Analysts at Motilal Oswal Securities had pegged margins to come at 39.6 per cent. This margin performance was significantly lower even though operating profits grew 13 per cent year-on-year.

Higher raw material costs fuelled by the rising Chinese chemical prices were the