Sharekhan's research report on Divis Laboratories
USFDA has informed Divis Laboratories (Divis) that it will be lifting Import Alert 66-40 and close out the warning letter at unit-2 at Vishakhapatnam, which was re-inspected in September 2017 and was issued fresh Form 483 with six observations (the company had filed the response to USFDA in October 2017).
Outlook
Taking cue from the recent developments, we have revised our sales and earnings estimates for FY2019 and FY2020 earnings. Hence, we upgrade our recommendation to Buy with a revised price target of Rs.1,275 (valuing the stock at 22x FY2020E earnings vs. earlier 20x) as successful resolution of import alert and warning letter in a shor t span of time restores the confidence in the company and its management.
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