Buy Divis Laboratories; target of Rs 6812: Sharekhan

Sharekhan's research report on Divis Laboratories

Divis Labs’ revenue for the quarter amounted to Rs. 2,238 crore, marking a 17% y-o-y increase and a 6% q-o-q rise, which was 4% above estimates. EBITDA stood at Rs. 616 crore, reflecting a 29% y-o-y increase but a slight decline of 1% q-o-q, falling short of our expectations by 4%. Margins stood at 28%, indicating a 243 bps y-o-y improvement but a 184 bps q-o-q decrease. PAT reached Rs. 510 crore, showing a 47% increase y-o-y and a 19% q-o-q rise, exceeding our estimates by 15%.

Outlook

We observe a consistent increase across all key financial metrics, indicating a significant potential for stock. Therefore, we maintain BUY. Currently, at the CMP, the stock is priced at 70x the FY2026E EPS of Rs. 83.89 and 59x the FY2027E EPS of Rs. 100.30. Given the sustained growth in the custom synthesis business, we have established a PT of Rs. 6,812.