Divi's Labs Q2 Review: Should You Buy The Stock After Earnings? Here's What Brokerages Say
Nuvama and Citi upgrade targets, Jefferies retains 'hold'.
Brokerages have shared mixed sentiment on Divi’s Laboratories following its September-quarter performance, highlighting the company’s growth in custom synthesis and the potential within its peptide and GLP-1 portfolio while acknowledging challenges in the generics segment.
Divi's Laboratories Q2 Highlights (Consolidated, YoY)
Revenue up 22.5% at Rs 2,338 crore versus Rs 1,909 crore.
Ebitda up 49.5% at Rs 716 crore versus Rs 479 crore.
Ebitda margin at 31% versus 25%.
Net profit up 47% at Rs 510 crore versus Rs 348 crore.
Jefferies has retained a ‘hold’ rating with a revised target price of Rs 5,790. The firm pointed to the robust 60% YoY growth in Divi’s custom synthesis segment, driven by rising demand, yet flagged concerns over high valuations. While Divi’s custom synthesis growth looks promising, Jefferies noted that the generics division has faced pricing pressures, with inventory overstock leading to continued price erosion. With ongoing investments in the peptide domain, including advanced stages of development, Jefferies sees long-term potential but limited short-term upside due to high valuations.
Nuvama Institutional Equities maintained a ‘buy’ rating with an increased target price of Rs 6,830, following Divi’s "optimistic" second quarter outperformance, led by CS growth and further expansion opportunities. The brokerage highlighted new projects such as GLP-1 commercialisation, expected to materialise over the next 15 months, and the Kakinada project, which is set to begin phased production by December. Nuvama sees Divi’s as well-positioned to leverage these opportunities, although it cautioned that currency fluctuations could affect profitability given the company’s export focus.
Citi Research also expressed a positive outlook, upgrading the target price to Rs 6,850 with a ‘buy’ rating. Citi analysts noted Divi’s strong potential in GLP-1, suggesting the company is positioned to capitalise on demand in this high-growth therapeutic area. They view Divi’s as capable of securing a competitive edge over European and Chinese firms due to cost advantages and ongoing geopolitical shifts. Citi noted an increase in customer interest and order flows in custom synthesis, reflecting a shift towards Divi’s in the supply chain.
Overall, while brokerages recognise the promising growth in Divi’s custom synthesis and upcoming projects, especially in peptides and GLP-1, challenges in generics remain a concern.
Shares of the company closed 0.17% lower at Rs 5,949.85 per share, compared to a 0.21% decline in the NSE Nifty 50. The stock has risen 52.41% year-to-date and 70.33% over the past 12 months.
