Hold Divi's Laboratories; target of Rs 585: Edelweiss

Edelweiss' research report on Divi's Laboratories

Divi's Laboratories’ (Divi’s) Q4FY17 sales, EBITDA and PAT fell 3%, 9% and 19% YoY, respectively. Capacity constraint led to muted top line and cost escalation due to remedial measure impacted profitability. Management has revised down FY18 revenue guidance to single digit versus 10-15% earlier.

Outlook

Further, the company has been unable to initiate fresh capex at Kakinada due to local political issues, whereas current capacity is running almost full. Ergo, we rule out any meaningful growth over the next 2 years. Maintain ‘HOLD’ with target price of INR 585 (15x FY19E EPS).