Buy Divi's Laboratories; target of Rs 4315: ICICI Direct

ICICI Direct's research report on Divi's Laboratories

Divi’s is engaged in manufacturing generic APIs and intermediates, custom synthesis (CS) of active ingredients and advanced intermediates for pharma MNCs, other speciality chemicals like Carotenoids and complex compounds like peptides and Nucleotide revenues. In CS, the company maintains a strong relationship with global big pharma players while in generics it enjoys significant market share in products like Naproxen, Dextromethorphan and Gabapentin among others • Divi’s is fully backward integrated in products with high market share. The management intends to follow suit in other products.

Outlook

Maintain BUY as the company remains a compelling bet as a structurally well positioned customs synthesis and API company, even after a possible flattish year ahead on a high base in FY22 while some near term margin pressure is transitory in nature. Valued at Rs 4315 i.e. 38x P/E on FY24E EPS of Rs 113.5.