Sell Divis Laboratories; target of Rs 3670: ICICI Securities

ICICI Securities is bearish on Divis Laboratories has recommended sell rating on the stock with a target price of Rs 3670 in its research report dated August 04, 2024.

Broker Research

August 06, 2024 / 14:55 IST

Hold

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bselive
nselive

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ICICI Securities's research report on Divis Laboratories

Divi’s Laboratories’ (Divi’s) Q1FY25 result was sub-par. Revenue traction was driven by custom synthesis (CS) (up ~46% YoY), while generics grew 1.5% YoY due to double-digit price erosion in key products like Naproxen, Gabapentin and Dexamethasone. Divi’s has nearly doubled its gross block to INR 67bn in last 4 years and has committed a further INR 15bn for FY25. Going ahead, growth in API business will likely be driven by better volumes for existing products and new launches like ticagrelor, lacosamide and brivaracetam which is likely boost growth from FY26. In CS supplies for two projects is driving growth, and in CY25, it will start supplies of fragments for GLP products. Phase 1 of Kakinada plant is on track and supplies to regulated markets may begin in FY27 (1x asset turn in 2-3 years).

Outlook

We cut FY25E EPS by ~4% to factor in pricing pressure in generics. The stock has run up ~26% in last 3 months and trades at a pricey 51.8x FY26E EPS; downgrade to SELL, maintain TP of INR 3,670.

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