Hold Divis Labs; target of Rs 1112: Firstcall Research

Firstcall Research report on Divis Laboratories

'Divis Research Center (Divis laboratories ltd) established in the Year 1990. Starting as a Research Center and focused on developing new process for the production of Active Pharma Ingredients and Intermediates. The years spent as a research center helping many companies with its turn-key and consulting strengths went a long way in choosing the right areas to enter for manufacturing, and established its first manufacturing facility in 1995 for manufacturing quality products and changes its name to Divis Laboratories Limited from Divis Research Center."

"Divis has triple Certifications ISO-9001 (Quality Systems), ISO-14001 (Environment Management Systems) and OHSAS-18001 (Occupational Health and Safety systems) for its manufacturing facilities and adheres to cGMP and standard operating practices in its manufacturing/operating activities and these certifications are renewed from time to time. All the manufacturing sites have been inspected by US-FDA, barring the recently implemented DSN SEZ Unit which expectes an inspection next year. Divis has a total of 36 drug master files (DMFs) with USFDA and 190 EDMFs and 13 CoS (Certificates of Suitability) with various European Union authorities. Divis has filed a total number of 22 patents in India and 17 in USA for generic products."

"Divis Research Center (Divis Laboratories Ltd) starting as a Research Center and focused on developing new process for the production of Active Pharma Ingredients and Intermediates in India, reported its financial results for the quarter ended 31st March, 2013. The fourth quarter witnesses a healthy increase in overall sales as well as profitability of the company. The company’s net profit declined to Rs. 1818.30 million against Rs. 2147.80 million in the corresponding quarter ending of previous year, a decrease of 15.34 percent. Revenue for the quarter dips by 8.45 percent to Rs. 6512.80 million from Rs. 7114.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 13.70 a share during the quarter, registering 15.34 percent decrease over previous year period. Profit before interest, depreciation and tax is Rs. 2599.70 millions as against Rs. 2907.30 millions in the corresponding period of the previous year."

"At the current market price of Rs.1011.00, the stock P/E ratio is at 20.57 x FY14E and 18.69 x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.49.15 and Rs.54.09 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 13 percent and 10 percent over 2012 to 2015E respectively. On the basis of EV/EBITDA, the stock trades at 14.30 x for FY14E and 12.97 x for FY15E. Price to Book Value of the stock is expected to be at 4.42 x and 3.72 x respectively for FY14E and FY15E. The company operates predominantly in export market and has a broad product portfolio under generics and custom synthesis. Business has been growing decently across both there segments and Exports constituted 90 percent of Sales and about 76 percent to Advanced Markets in North America and Europe. The company continues to increase capacities created at its multi –purpose manufacturing facilities and also additional capacities aimed at the business opportunities in the field of Generic market. We recommend ‘Hold’ in this particular scrip with a target price of Rs 1112 for medium to long term investment,” says Firstcall Research report.

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