Brokerage firm Citi has initiated its coverage of Divi's Laboratories with a 'buy' rating, propelling the drugmaker's shares nearly 7 percent higher to an all-time high of Rs 5,925 on October 9.
Alongside its optimistic outlook, Citi set a price target of Rs 6,400 for the stock, the highest on the Street, suggesting over a 15 percent upside from the previous closing price. With this, Citi also became the first brokerage to see Divi's Labs stock surpassing the Rs 6,000-mark.
At 12.42 pm, shares of Divi's Labs were trading at Rs 5,921.15 on the NSE. The spike in the stock was also fueled by a surge in trading volumes, with around 17 lakh shares exchanged on the exchanges so far higher than the one-month daily average of nine lakh shares.
What's more interesting is that this bullish view for Divi's Labs has come just a little more than a week after the stock was thrown out of the Nifty 50 index, having been replaced by Trent and Bharat Electronics.
Citi feels that Divi's has secured its place in the Glucagon-Like Peptide-1 Active Pharmaceutical Ingredients (GLP-1 API) space as innovators look to de-risk supply chains out of China. GLP-1 APIs are compounds used in medications that mimic the action of GLP-1, a hormone involved in glucose metabolism and appetite regulation, commonly utilised in the treatment of diabetes and obesity.
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Citi estimates that the emerging opportunity from GLP-1 APIs could provide Divi's Laboratories with revenue potential exceeding $800 million by 2030, as the company is expected to be a key beneficiary of the trend toward supply chain diversification.
With innovators placing more confidence in the company, Citi expects a FY26/27 EBITDA that's 3 percent and 12 percent higher than the consensus for Divi's, primarily banked on this GLP-1 opportunity and other new products.
However, a failure to scale up its custom synthesis business offers a key risk for Divi's Labs, which might trigger the bear case target of Rs 5,100 for the drugmaker, Citi wrote.
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