CDMO player Divi’s Laboratories Ltd. shares rallied six percent in trade on Monday, May 19, on posting a sharp beat in its earnings report for the January-March period of FY2025, lead by a recovery in the API segment.
At 10.45 am, shares of the pharma player were quoting Rs 6,649 per share, higher by 5.9 percent on the NSE compared to the previous session's closing price.
The pharma player reported a 23 percent jump in net profit for the three months ended March at Rs 662 crore. The firm's revenue came in at Rs 2,585 crore, higher by 12.2 percent compared to Rs 2,303 crore during the year-ago period.
The company's gross margins for the quarter stood at 62.1 percent, up 122 basis points from the previous year. The margin improvement was driven by stable raw material prices and a favourable product mix.
Despite pricing challenges in the generics portfolio (49 percent of 4QFY25 sales), Divi's has been able to exhibit ~13 percent YoY growth in API revenue, implying strong volumes. The company’s 2HFY25 witnessed meaningful recovery in the API segment after almost eight quarters of weak performance.
Should you buy, sell, or hold Divi’s Laboratories shares?
Choice Broking said it believes Divi's is well positioned to capitalize on the growing demand for CDMO in India. The Custom Synthesis (CDMO) segment remains a key growth driver, and its backward integration efforts aid margin expansion.
"The company is also on track to commercialize GLP-related contracts by CY26 or early CY27. We believe the company is well-positioned to pass on any cost increases in the event of US tariffs being implemented, and therefore do not expect any material impact on its financials," said the brokerage, maintaining its 'buy' call, with a price target of Rs 7,275.
International brokerage Morgan Stanley also reiterated its 'overweight' rating on Divi's Labs with a target price of Rs 7,185, citing in-line Q4FY25 results.
Antique Stock Broking upgraded its rating on Divi's from 'sell' to 'hold', hiking the price target to Rs 6,575 per share, which was previously Rs 4,150. Further, Antique revised its FY27E revenue and EBITDA estimates upward by 11 percent and 12 percent, respectively, factoring in the growing momentum in the CDMO business (including contrast media) and generics APIs.
"We now model a revenue CAGR of 17 percent over FY25–27E, with an EBITDA margin expansion of ~500 bps," added the brokerage.
Motilal Oswal noted, "Given its strong capabilities in the peptide space, Divi's is in a sweet spot to
garner contracts from innovator customers for upcoming opportunities. In fact, DIVI is offering the CDMO services in GLP1, GLP2, as well as GIP molecules (refer to exhibit one). In addition to this, DIVI has a product pipeline in the generics category to drive growth on an overall basis."
The brokerage reiterated its 'neutral' rating on the stock, with a target of Rs 6,540 per share, which indicates an upside potential of four percent from current levels.
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