Pharma major Divi's Laboratories is expected to post a sequential improvement in its revenue and net profit for Q2 FY24. The drugmaker is scheduled to detail its July-September earnings on November 6. A year-on-year (YoY) growth comparison doesn't sit well for Divi's because of a high base due to the stellar contribution from the COVID-19 drug Molnupiravir last fiscal.
According to a poll of brokerages collated by Moneycontrol, the drugmaker is expected to report a net profit of Rs 423 crore down by 14.3 percent from Rs 493.60 crore clocked in the year-ago period. Sequentially, net profit is seen up 8 percent from the previous quarter's Rs 1,778 crore.
Revenue is seen rising a modest 3 percent YoY to Rs 1,913.20 crore compared to Rs 1,854.54 crore in the same quarter of the previous fiscal. On a sequential basis, however, the growth comes to around 8 percent. The expectations of moderate sequential growth are on account of lower export shipment data for August, Nuvama Institutional Equities pointed out.
Meanwhile, much of the sales growth in Q2 is likely to be driven by generics and nutraceuticals, Kotak Institutional Equities believes. Some contribution is also expected from new non-COVID projects.
Among the brokerages polled by Moneycontrol, Incred Equities had the lowest growth projections for Divi's Labs while Jefferies pegged the maximum growth.
Incred Equities also believes that a sequential improvement is already factored in for Divi's Labs and a miss on this front could lead to a sharp cut in its earnings.
The drugmaker is also expected to witness a sequential margin improvement on the back of a better product mix and higher gross margins, brokerage firm Prabhudas Lilladher highlighted in its report. KIE pegged a 20 basis point sequential expansion in gross margins for Q2 on the back of stabilising raw material prices.
On that account, Nuvama expects EBITDA margin to recover gradually to ~30.2 percent (+200 basis points sequentially) but remain substantially lower than its historical run-rate of 34-35 percent.
Aside from that, softening overall API (Active Pharmaceutical Ingredients) prices will also weigh on Divi's Q2 earnings.
Prabhudas Lilladher also believes that the company's outlook on margins and growth in high-margin custom synthesis will remain the key monitorables for stakeholders.
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