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Nov 06, 2012, 03.33 PM IST | Source: Moneycontrol.com

Accumulate Divis Laboratories; target Rs 1296: PLilladher

Prabhudas Lilladher is bullish on Divis Laboratories and has recommended accumulate rating on the stock with a target of Rs 1296 in its November 5, 2012 research report.

Prabhudas Lilladher is bullish on Divis Laboratories and has recommended accumulate rating on the stock with a target of Rs 1296 in its November 5, 2012 research report.

“Divi’s revenue for the quarter reported growth of 33.5% YoY to Rs4.73bn, led by both CCS and API segments. However, the Neutraceuticals business remains flat YoY though there was some improvement over last quarter. The company has reduced its top-line guidance from 25% to ~22% for FY13 due to slower ramp-up in revenues from new SEZ.”

“The company reported increase of 30% YoY in EBITDA during the quarter to Rs1.64bn, while EBITDA margins contracted by 90bps YoY to 34.7% on account of higher manufacturing expenses and forex losses. Despite strong growth in EBITDA???, PAT reported muted growth of 11% to Rs1.18bn due to lower other income and higher tax rate on account of expiry of tax benefits in its EOU and SEZ.”

“We expect 21% earnings CAGR over FY12-14 on the back of 19% revenue CAGR and 160bps margin expansion. Divi's is well positioned in the CRAMS space, given its strong relationships with innovators, presence across the CRAMS value chain and its ability to support the innovator in late life-cycle strategies. We expect Divi's to be a key beneficiary of the increased pharmaceutical outsourcing from India, given its strong relationships with global innovator pharmaceutical companies. The stock trades at 23.9x FY13E and 20.3x. We maintain ‘accumulate’ with a target price of Rs1,296,” says Prabhudas Lilladher research report.

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