Sell Divi's Laboratories, target price Rs 4,500: ICICI Securities

ICICI Securities has a sell call on Divi's Laboratories with a target price of Rs 4,500. The current market price of Divi's Laboratories is Rs 6081. Divi's Lab, incorporated in 1990, is a Large Cap company with a market cap of Rs 161670.37 crore, operating in the Pharmaceuticals sector.

Divi's Laboratories' key products/revenue segments include Pharmaceuticals, Scrap, Sale of services and Export Incentives for the year ending 31-Mar-2024.

Financials

For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 2401 crore, down -1.76% from last quarter Total Income of Rs 2,444 crore and up 23.13 % from last year same quarter Total Income of Rs 1950 crore. The company has reported net profit after tax of Rs 589.00 crore in the latest quarter.

The company's top management includes Dr.Ramesh B V Nimmagadda, Dr.Murali K Divi, Dr.Kiran S Divi, Ms.Nilima Prasad Divi, Dr.S Devendra Rao, Mr.N V Ramana, Mr.K V Chowdary, Dr.S Ganapaty, Prof.Sunaina Singh, Dr.Rajendra Kumar Premchand, Dr.Ramesh B V Nimmagadda, Mr.K V K Seshavataram, Dr.Murali K Divi, Dr.Kiran S Divi, Ms.Nilima Prasad Divi, Dr.S Devendra Rao, Mr.N V Ramana, Mr.K V Chowdary, Dr.S Ganapaty, Prof.Sunaina Singh, Dr.Rajendra Kumar Premchand, Mr.K V K Seshavataram. Company has Price Waterhouse Chartered Accountants LLP as its auditors. As on 31-12-2024, the company has a total of 27 crore shares outstanding.

Investment Rationale
Better traction in custom synthesis (CS) biz (up 44% YoY) and turnaround in generic API (8.4%) drove outperformance in Divi?s Q3FY25 result. US and Europe (72% of sales) grew the fastest at 31.8% YoY. Divi?s is supplying amino acids for GLP-1 products to its customers in US and Europe and aims to forward integrate into fragment manufacturing. Management anticipates double-digit revenue growth for next couple of years driven by better volumes and launches in generic segment, supply of contrast media products to innovators and new projects (including GLP-1) in CS biz. Divi?s will manufacture KSM and nutraceuticals products at Kakinada plant (phase 1 started) and management believes commercialisation of this plant will not be a drag on margins. ICICI Securities has raised FY25E EPS by ~4% (FY26E unchanged) to factor in traction in CS biz. The brokerage maintains a SELL rating with an unchanged target price of Rs 4,500 on 45x FY26E earnings.

Promoter/FII Holdings
Promoters held 51.89 per cent stake in the company as of 31-Dec-2024, while FIIs owned 17.98 per cent, DIIs 20.37 per cent.