Neutral Divis Laboratories; target of Rs 6925: Motilal Oswal

Motilal Oswal's research report on Divis Laboratories

Divi’s Laboratories (DIVI) delivered better-than-expected performance in 2Q with a 4%/10%/10% beat on revenue/EBITDA/PAT. While gross margin has been steady for the past eight quarters, DIVI has delivered improved EBITDA margin YoY as well as QoQ, led by better operating leverage. Based on the generics and custom synthesis (CS) composition highlighted by the management, DIVI has achieved an all-time high quarterly revenue in the CS segment in 2QFY26.

Outlook

We broadly retain our FY26/FY27/FY28 estimates. We value DIVI at 55x 12M forward earnings to arrive at our TP of INR6,925. DIVI continues to strengthen its position as a reliable CDMO company for global pharma players, aided by 1) differentiated skill sets such as peptide and contrast media manufacturing, 2) enhanced reliability for supply despite geopolitical turmoil, and 3) a built capacity that would cater to future requirements.