Motilal Oswal is bullish on Divi’s Laboratories recommended buy rating on the stock with a target price of Rs 3350 in its research report dated August 09, 2020.
Motilal Oswal 's research report on Divi’s Laboratories
Divi’s Lab (DIVI) delivered all-time high sales/EBITDA/PAT for the quarter. Overall performance was led by volumes and did not include any business opportunity related to COVID-19 treatment. The major capex program would be completed in FY21, and the commercial benefit would start accruing in FY22. This would further enhance the earnings trajectory going forward. - We raise our earnings estimate for FY21/FY22 by 16%/13% to factor robust demand for DIVI’s products, improving profitability owing to backward integration, and incremental business from new capex. We value DIVI at 35x (a 25% premium to its three-year average) considering: (a) renewed growth prospects for generic APIs, (b) its strong relationship with innovators, which is improving the scope of business in CRAMS (Contract Research And Manufacturing Services), and (c) capex support to meet the future requirements of customers.
Outlook
Accordingly, we arrive at TP of INR3,350 on a 12M forward earnings basis.
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