Motilal Oswal Financial Services raised the target price for Divi's Laboratories to Rs 3,900 after the company delivered a strong beat on earnings in 4QFY24, fueled by a revival in the Custom Synthesis (CS) business. Improved sales growth drove better profitability for the quarter as well, said Motilal Oswal. The brokerage retained its 'Neutral' rating on the stock.
Motilal Oswal raised the earnings estimates by 3 percent each for FY25 and FY26, factoring in a better demand outlook in the CDMO segment, the addition of new technologies, and a higher number of product offerings in the generics segment.
Divi's has been making great strides in the CS and API segments through a
strong chemistry skill set, said Motilal Oswal. "It is not only getting ready to supply APIs once they are off-patent but also working on backward integration to gain market share and maintain profitability in the existing API portfolio," the brokerage said in a report dated May 26.
Also Read | Divi's Labs Q4 preview: Revenue, net profit to grow on normalised base, better product mix
Motilal Oswal said that Divi's continues to improve its services under the CDMO segment during product development and manufacturing stages. "We expect a 27 percent earnings CAGR over FY24-26," said the brokerage.
The Indian pharma major on May 25 reported a 67 percent rise in consolidated net profit to Rs 538 crore in the Jan-March quarter of FY24. Revenue for the quarter grew 18 percent on year to Rs 2,303 crore. The Board also recommended a final dividend of Rs 30 per share.
On May 25, shares of Divi's closed flat at Rs 4,116. The stock has gained 18 percent in the past year, underperforming Nify 50 which gained 23 percent during the same period.
Incorporated in October 1990, Divi’s Laboratories is a pharmaceutical and biotechnology company engaged in generic API, custom synthesis and nutraceuticals. It caters to therapeutic segments like cardiovascular, anti-inflammatory, anti-cancer and central nervous system drugs.
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