Neutral Divi’s Laboratories; target of Rs 3250: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Divi’s Laboratories

DIVI delivered an earnings miss in 2QFY23. Reduced traction in Custom Synthesis (CS), coupled with lower operating leverage, resulted in an earnings decline for the first time after 12 quarters of a strong performance. We cut our FY23/FY24 estimates by 18%, factoring in: a) a deceleration in the CS business and commercial benefit from certain newer projects on completion of clinical trials (FY24 onwards), b) moderation in the API business, and c) delayed scale-up in the Nutraceuticals business, despite a capacity expansion. We also lower our P/E multiple to 30x from 33x to factor in lower visibility on Kakinada capex, considering capex to be one of the leading growth indicators for DIVI.

Outlook

Accordingly, we arrive at our TP of INR3,250 (from INR4,280 earlier). We have downgraded our rating to Neutral, considering the muted outlook (a 4.5% compounded decline in earnings over FY22-24). Valuation is yet to factor in the same.

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Divi’s Laboratories - 08-11-2022 - moti