Divi's Laboratories is likely to see a hole in its earnings for the quarter ended March, weighed by an unfavourable base last year on account of COVID sales and elevated input costs. Analysts at Philip Capital also feel a high base of COVID drug Molnupiravir, which will be absent from Q4 and rationalisation inventory post-Covid globally will drag down the drugmaker's revenue and operating margin.
The API (active pharmaceutical ingredient) player will detail its earnings for the January-March quarter on May 20.
As per a poll of brokerages collated by Moneycontrol, Divi's Laboratories is widely expected to post a net profit of Rs 373.30 crore, a near 58 percent year-on-year decline from Rs 882.96 crore in the corresponding quarter a year ago.
The steep profit decline will be fueled by a sharp loss in revenue, which analysts pegged at Rs 1,863.50 crore. For contrast, revenue in the fourth quarter of the fiscal year were at Rs 2,495.03 crore.
Brokerage firm ShareKhan stated that API players such as Divi’s Labs are witnessing lower revenue due to normalisation of COVID-19 products sales currently and de-leveraging as new deals start commercialising over the medium term.
However, one can find a glimmer of hopes if numbers were to be looked at sequentially. On a sequential basis, the company is likely to see a marginal recovery, as revenue grows in single-digit from Rs 1,689.83 crore in the previous quarter.
According to Nuvama Institutional Equities, the sequential recovery will be aided by the drugmaker's non-covid custom synthesis projects. On top of that, the supply of API of the heart failure drug Sacubitril to Novartis will also reflect in the quarter-on-quarter financials of Divi's Labs.
Along with some recovery in the topline, EBITDA (Earnings before interest, taxes, depreciation, and amortization) margin is also anticipated to rebound from the lows of the previous quarter.
In Q4, EBITDA margin is expected to come around 29 percent, down 1,490 basis points from the year ago period, but 510 basis points higher sequentially. One basis point is one-hundredth of a percent.
Going forward, brokerage firm Prabhudas Lilladher sees outlook on margins and growth in custom synthesis as key monitorables for the pharmaceutical major.
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