ICICI Securities's research report on Divi's Laboratories
Divi’s Laboratories’ (Divi’s) Q4FY25 outperformance was led by a strong uptick in its export (up 14.3%) markets such as US and Europe (+16% YoY) and better product mix; also, sharper overhead cost control fuelled 253bps of EBITDA margin expansion to 34.3%. Divi’s has started intermediate (including GLP-1) manufacturing for captive consumption at its Kakinada plant; over the next few months, it would vacate products from Unit 1&2 for GLP-1 products. Divi’s has established a niche in amino acids and solid/liquid phases of synthesis for GLP-1.
Outlook
We have increased our EPS for FY26E/FY27E by 3–7% to factor in better margins. We build in revenue/EBITDA/PAT CAGRs of 23.2%/30.8%/31.3% over FY25–27E. While we remain excited about the capex-driven growth and other margin-lucrative opportunities, the stock trades at pricey valuations of 58.8x FY26E, 44.9x FY27E earnings and EV/EBITDA multiple of 42x FY26E and 31.9x FY27E. We upgrade our rating to REDUCE, with a higher TP of INR 5,610 (earlier INR 4,500), based on 40x FY27E (45x FY26E previously) EPS of INR 140.
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