Motilal Oswal's research report on Divi’s Laboratories
Divis Lab (DIVI) delivered a miss on 2QYF24 earnings. While revenue was in line with estimates, profitability was lower than expectation, partly due to lower pricing in the generic API segment. We reduce our earnings estimate by 5%/3% for FY24/FY25, factoring in a) increased competition in the API segment, and b) higher tax rate, partly offset by improved growth momentum in the Nutraceutical business.
Outlook
We value DIVI at 35x 12M forward earnings to arrive at a price target of INR3,330. We are building 25% earnings CAGR over FY23-25 (adjusting for COVID-led business in FY23). This is on the back of improved visibility for contracts in the custom synthesis segment as well as ramp-up in products in contrast media space. We believe the current valuation adequately factors the upside in earnings. We reiterate our Neutral stance on the stock.
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