Growth and margin uptick critical for gains in Divi's Laboratories

Motilal Oswal Research is factoring in 25 per cent net profit growth annually over FY23-25, adjusting for Covid-led business in FY23

The September-quarter (second quarter of financial year 2023-24, or Q2FY24) performance of Divi’s Laboratories fell short of analyst expectations, especially on the profitability metric. Rise in input costs, inventory write-off, and pricing pressures led to a drop in gross margins. Higher competitive pressures led to cuts in operating profit margins and earnings estimates for FY24 and FY25. Most brokerages have a ‘neutral’ or a ‘reduce’ rating on the stock on account of valuations.
 

Divi’s overall revenues grew 2.2 per cent year-on-year (Y-o-Y), dragged down by the custom synthesis (CS) segment, which was down 4 per cent due to the higher