Buy Divi's Laboratories; target of Rs 4205: ICICI Direct

ICICI Direct's research report on Divi's Laboratories

Revenues grew 21.0% YoY to Rs 1749 crore (I-direct estimate: Rs 1679 crore). Generic segment grew 25.9% YoY to Rs 883 crore. Custom synthesis grew 18.1% YoY to Rs 700 crore. Carotenoids grew 9.9% YoY to Rs 167 crore. EBITDA margins expanded 843 bps YoY to 42.4% (I-direct estimate: 36.5%) due to significantly better gross margin performance and lower other expenditure. Subsequently, EBITDA grew 51.1% YoY to Rs 741 crore (I-direct estimate: Rs 613 crore). Net profit grew 45.6% YoY to Rs 520 crore (I-direct estimate: Rs 448 crore) in-line with strong operational performance. Delta vis-a-vis EBITDA was due to lower other income and higher depreciation.

Outlook

Divi’s stays a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess. We maintain BUY with a TP of Rs 4205 based on 38x FY23E EPS of Rs 110.6.

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