Divi’s Laboratories tanks over 6% on weak Q4 earnings, downgrade

NEW DELHI: Divi’s Laboratories Ltd slipped over 6 per cent in morning trade on Tuesday, after the company posted 16.75 per cent decline in its consolidated net profit at Rs 180.57 crore for the fourth quarter ended March 31, 2013.

At 10:50 a.m.; the stock was trading 6.5 per cent lower at Rs 1015. It hit a low of Rs 1011 and a high of Rs 1075 in trade today.

“Divi’s reported weak earnings which were significantly lower than estimates. Sales declined by 8 per cent YoY due to higher base and lower utilization driven by inspections/capacity expansions,” Kotak Institutional Equities said in a report.

Net sales of the company stood at Rs 655.83 crore for the fourth quarter, compared to Rs 718.04 crore in the same period of 2011-12 fiscal, Divi's Laboratories said in a filing to the BSE.

The company's net sales for the year ended March 31, 2013, stood at Rs 2,139.90 crore, as against Rs 1,858.43 crore in the previous fiscal.

“While the capacity expansion had been largely completed, the commissioning/inspection of the new units are expected in 2HFY14 – we expect limited triggers in the near term,” said the Kotak report.

The brokerage firm maintains ‘reduce’ rating on the stock with a target price at Rs 1,060 from Rs 1,140 earlier.

HSBC also downgraded the stock to ‘neutral’ from ‘overweight’ with a target price of Rs 1210 down from Rs 1305 earlier. BofA-ML maintains ‘buy’ rating but has reduced the target price from Rs 1305 earlier to Rs 1255.