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Divi's Labs jumps 6% on stellar Q4; brokerages upgrade target prices

Divi's Labs net profits rose by 67 per cent to Rs 538 crore in the January-March quarter of FY24 compared to Rs 321 crore in the corresponding period last year

Divi's Labs, Divi's

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Shivam Tyagi New Delhi

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Shares of Divi’s Laboratories soared by 5.6 per cent, hitting its 52 week high at Rs 4,356.85 a piece on the BSE in Monday’s intraday trade. This comes after the pharma major delivered strong quarter four earnings for the fiscal year 2023-24 (Q4FY24). 

Divi’s Labs net profits rose by 67 per cent to Rs 538 crore in the January-March quarter of FY24 compared to Rs 321 crore in the corresponding period last year.

Revenue for the quarter also grew by 18 per cent to Rs 2,303 crore from Rs 1,951 crore in the same period a year ago. 

Earnings before interest tax and amortisation (Ebitda) hiked to Rs 731 crore compared to Rs 473 crore in the corresponding period last year. While the Ebitda margin for the quarter expanded to 31.7 per cent from 25 per cent year-on-year (YoY).

The brokerages stood impressed with the company's show and its FY25 commentary, however many highlighted the downside in the stock price amidst rich valuation. 

Divi's expects double-digit growth driven by gains in emerging generic APIs and its volumes; expansion in CDMO business and the launch of two new projects. However, most of this growth is factored in the stock price, said those at Nuvama Research. 

Analysts at Nuvama Research said that the company beat its estimates handsomely in Q4FY24 with improved traction in the custom synthesis (CS) business leading to better product mix. Nuvama factors in a 16 per cent and 26 per cent revenue and Ebitda compound annual growth rate, respectively over FY24–26E. 

“The stock is trading at a rich 43x FY26E EPS; retain ‘REDUCE’ with a revised TP of Rs 3,660,” the brokerage said in a result update. 

Analysts at Kotak Institutional Equities also remained optimistic and forecasted a CSM sales CAGR of 23 per cent over FY2024-27E, thereby capturing an upside from GLP-1, contrast media and other projects. 

However analysts said that a risk of the pricing recovery in generic APIs being delayed remains, compared with their estimate of a revival in early FY2025E. “On these elevated estimates, valuations stay rich. Retain SELL with an FV of Rs3,250,” KIE said in a note. 

Those at Motilal Oswal expect a 27 per cent earnings CAGR over FY24-26. The valuations, however, adequately capture the earnings upside, said analyst at MOSL, reiterating ‘Neutral’ rating with a target price of Rs 3,900. 

At 10:08 AM; the stock of the company was trading 4.13 per cent at Rs 4,293.05 per share on the BSE. In comparison the S&P BSE Sensex was up by 0.09 per cent. The stock of the company is currently trading at a price to earnings valuation of 83.56 times, BSE data showed. 

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First Published: May 27 2024 | 10:17 AM IST

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