Hold Divi's Laboratories; target of Rs 3300: Prabhudas Lilladher

Prabhudas Lilladher's research report on Divi's Laboratories

Divi’s Laboratories (DIVI) reported weak performance in H1F23, while margins further declined in Q2. Given high COVID base in FY22, we expect flat PAT CAGR over FY22-25E. Yet efforts on backward integration, debottlenecking and utility upgradation will continue to yield better margins, in our view. DIVI remains a preferred play among Indian CRAMS and APIs, given the company’s strong execution track record. However, near-term growth will likely remain muted. Downgrade to ‘Hold’.

Outlook

We reduce our FY24/FY25E EPS estimates by 17%/14% and downgrade to ‘Hold’ from Accumulate with revised TP of Rs3,300/share (Rs4,100 earlier) valuing at 32x Sept 2024E P/E.