Divi's Laboratories is expected to post a 38 percent rise in its net profit for the January-March quarter of FY24, according to a poll of analysts. Earnings growth is likely to be driven by a normalised base in the absence of Covid drug Molnupiravir, a better product mix and an uptick in API prices.
Divi's Labs's net profit for Q4 of FY24 is expected to rise to Rs 443 crore, up from Rs 321 crore from the same quarter last fiscal, according to the poll of six brokerages collated by Moneycontrol. The company is slated to report its Q4 results on May 25.
Revenue is likely to grow almost 9 percent to Rs 2,125 crore from Rs 1,951 crore in the base quarter, according to the poll.
Kotak Institutional Equities projected the most bullish earnings estimates for Divi's Laboratories while SMIFS Ltd expected the least growth.
Normalised base, better product mix to aid growth
The March quarter of FY24 will enjoy the benefit of a normalised base for the company due to the absence of contribution from COVID drug Molnupiravir. In addition, a better product mix aided by steady growth in the generics and nutraceuticals segments will also aid earnings growth.
Moreover, the drugmaker's custom synthesis business is expected to deliver mid-teens growth in the quarter gone by, adding to the upside triggers. "We expect custom synthesis media sales in Q4 FY24 to benefit from the two big contrast media projects commercialised in the previous quarter," said Kotak Institutional Equities.
Incred Equities also maintains an optimistic view for Divi's Q4 performance, banking on its favourable seasonality of the quarter under review. "Historically, Q4 is the strongest quarter for Divi’s Laboratories, with a higher contribution from the custom synthesis business and we expect the trend to continue this time around too," the brokerage said.
Margin expansion on the way
An uptick in prices of Active Pharmaceutical Ingredients (API), along with an improved product mix is likely to aid margin expansion for Divi's in the March quarter.
"Margins are likely to be around 28 percent, an expansion of ~150bp largely on account of a better product mix. The Red Sea issue is likely to lead to higher logistic costs or else margin expansion would have been higher," Incred said.
Sharekhan also pointed out new product launches as a key trigger in lifting margins for the CDMO player.
Going ahead, Prabhudas Lilladher believes the drugmaker's outlook on margins and growth in custom synthesis are likely to remain key monitorables.
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