Divi's Laboratories surges 6%, hits a record high on strong Q2 numbers

Q2FY21 EBITDA margins expanded 843 bps YoY to 42.4 per cent due to significantly better gross margin performance and lower other expenditure.

Shares of Divi's Laboratories hit a record high of Rs 3,432.70, up 6 per cent on the BSE in the early morning trade on Monday after the company reported a strong 45.6 per cent year-on-year (YoY) jump in its net profit at Rs 520 crore, on the back of healthy operational performance for September quarter (Q2FY21). The stock of the pharmaceutical company surpassed its previous high of Rs 3,888, touched on September 18, 2020.

In Q2FY21, the company’s revenues grew 21 per cent YoY to Rs 1,749 crore. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margins expanded 843 bps YoY to 42.4 per cent due to significantly better gross margin performance and lower other expenditure.

The company said apart from the existing capex programs, it is taking up a new capex for an aggregate amount of Rs 400 crore for meeting new business opportunities in the custom synthesis projects; and needed to be completed on the fast track.

“Impact of this massive investment is already visible and is expected to reflect over FY21-22. Divi’s remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess,” ICICI Securities said in a note.

“The company’s revenues were in line with I-direct estimates whereas profitability was better due to better-than-expected operational performance. More than strong quarterly performance, an important narrative for Divi’s is unprecedented capex to further augment capacities besides preparing for growing opportunities arising due to China plus one factor,” the brokerage said.