Divi’s Labs Q1 Results Review - Revenue, Margins Ahead Of Estimates: Systematix

Systematix Research Report

Divi's Laboratories Ltd.'s Q1 FY25 revenues outpaced expectations led by a very strong performance in the custom synthesis segment. The custom synthesis segment grew 45% YoY. Generic segment improved moderately (+4.8% YoY) due to volume growth complementing negative pricing pressure.

The company expects to grow double digit as they continue to build on multiple growth avenues – Contrast Media, GLP-1’s intermediates, foray into new generics closer to patent expiry, ramp up in sartans and other recently launched generics.

The generic pricing is currently under pressure and a cyclical upturn may be expected. On the contrast media, there is strong demand and company is in talks to double their capacities. They have also seen a meaningful increase in business for custom synthesis (early stage molecules) potentially led by the biosecure act.

We tweak our forecasts on Divis and expect 14% compound annual growth rate revenue growth over FY24 to FY26E. We revise our valuation multiple to 40 times considering the potential long term growth opportunity from Biosecure act.

We retain Sell rating on Divis with a revised price target of Rs 3,758 based on 40 times FY26 price-earnings multiple.

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