Accumulate Divi's Laboratories; target of Rs 4350: Prabhudas Lilladher

Prabhudas Lilladher's research report on Divi's Laboratories

Our FY25E/FY26E EPS estimates stands increased by ~10%. Divi’s Laboratories (DIVI) Q4FY24 EBITDA was 18% above our estimate led by higher custom synthesis (CS) revenues (up 47% YoY) and better operating leverage. GMs have largely stabilized over last few quarters and likely to improve led by better product mix and stable raw material prices. Mgmt. suggested that moderation of raw material prices, increasing RFP and commencement of some CDMO and contrast media contracts, will continue to aid revenues and margins.

Outlook

We expect 26% EBITDA CAGR and 27% PAT CAGR over FY24-26E. At CMP, stock is trading at 43x FY26E EPS. Upgrade stock from ‘Reduce’ to ‘Accumulate’ rating with revised TP of Rs4,350/share, valuing at 45x (35x earlier) FY26E EPS.