KR Choksey's research report on Divi's Laboratories
The likely beginning of supply of newly going off patent product’s APIs, ramp up in contrast media and Sartan products’ generic APIs as well as in the ongoing custom synthesis projects will fuel improved margins over short – long term. The new supply agreement with an MNC client and peptide ingredients opportunity present ample scope for valuation multiple expansion in the medium term.
Outlook
We enhance the FY25E and FY26E EPS estimates by 2.6% and 2.8%, respectively and value the company at a higher PE multiple of 45.0x its FY26E revised EPS at INR 99.5 (vs. earlier INR 96.8) and arrive at a revised TP of INR 4,478 (earlier INR 3,931). However, we downgrade the stock to HOLD from ACCUMULATE as the upside potential is 5.2% from its CMP.
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