Hold Divi’s Laboratories; target of Rs 3168: Sharekhan

Sharekhan's research report on Divi’s Laboratories

Numbers are weak and failed to meet even our and street modest estimates, on all fronts in Q3FY2023. Divis’ registered weak performance in Q3FY2023 with revenues declining by a massive 31.5% yoy to Rs 1,708 crore and PAT declining by 66.0% y-o-y to Rs. 307 crore. Margins are expected to lag behind historical averages and normalize by FY25/26, as sales improve from new product opportunities in custom synthesis and contrast media APIs.

Outlook

We downgrade our Buy rating on Divis Laboratories (Divis) to Hold with a revised PT of Rs 3,168. The stock has corrected by 33.2% in last one year, at current levels also valuation looks rich at 35.0x and 29.1x its FY2024/25E earnings.