Divi’s Labs snaps 3-day losing streak, up 3% after 34%-fall

NEW DELHI: Shares of Divi’s Labs climbed nearly 3 per cent in Tuesday’s trade after falling 34 per cent in the previous three sessions amid concerns over USFDA’s observations on unit-II at Vishakhapatnam facility.

The stock rose 2.77 per cent to hit a high of Rs 786.50 on BSE. Many brokerages have raised concerns over the observations.

Brokerage Sharekhan has downgraded the stock to ‘hold’ as it believes the company management had not been very forthcoming in sharing information related to the USFDA event.

HSBC has cut target price on the stock to Rs 934 from Rs 1,233. The foreign brokerage has cut its FY17, FY18 and FY19 EPS estimates by 1.6 per cent, 6.9 per cent and 6.8 per cent, respectively, in view of possible shutdowns and higher potential costs involved in remediation of the issues.

The five observations highlighted that no proper control was exercised over a computer system, facility equipment were not maintained to ensure purity quality strength and documentation and records are not maintained or were inaccurate falsified.

“There have been some observations, which could be serious. But, we have to also understand that this is not an import alert. We have to still see how the company tries to sort this issue and address their US FDA concerns. We need to give some more time to the company,” said Sachin Shah, Fund Manager, Emkay Investment Managers.