₹9 to ₹3,578: Multibagger stock turns ₹1 lakh to ₹15.90 Cr in 19 years: Should you buy?
Premium- Divi's Laboratories Ltd is a large cap pharmaceutical company with a market valuation of ₹95,166.50 crore
Divi's Laboratories Ltd is a large-cap pharmaceutical company with a market valuation of ₹95,166.50 crore. A leading producer of active pharmaceutical ingredients, Divi's exports top-notch products to over 95 nations. As one of the leading API manufacturers in the world, Divi's produces generic APIs, nutraceutical ingredients, and offers custom API synthesis. The company also holds the feat of being among the top three API producers worldwide and among the top API companies in Hyderabad. One of the best examples of stocks that have made investors crorepati in a period of 19 years is the shares of Divi's Laboratories.
Divi's Laboratories Share Price History
On Monday, Divi's Laboratories Ltd. shares on the NSE closed at ₹3,578.00 a piece, down 0.26% from the previous close of ₹3,587.50. A multibagger return and an all-time high of 39,655.56% have been recorded by the stock price, which climbed from ₹9 on March 13, 2003 to the present price level. It would now be worth ₹3.97 Cr if an individual had invested ₹1 lakh in Divi's Laboratories shares 19 years ago. The stock price climbed over the past five years from Rs. 711.95 on September 1, 2017, to the present market price, resulting in a multibagger return of 402.56% and an approximate CAGR of 38.15%.
In the last 1 year, the stock has fallen 29.90% and on a YTD basis, the stock has fallen 23.07% so far in 2022. The aforesaid return of ₹3.97 Cr over 19 years would only have been possible if bonus shares or stock splits, which cause price action, had not occurred. But in the instance of Divi's Laboratories Ltd., that is not the case because, according to BSE records, the company declared bonus shares twice, once on 30 July 2009 and again on 23 September 2015, both in a 1:1 ratio. Let's now compute the returns taking into account bonus shares and a Rs. 1 lakh investment.
When the stock price was ₹9 on March 13, 2003, an investment of ₹1 lakh would have secured 11,111 total shares. The company announced a bonus of 1:1 on July 30, 2009, which raised your total share count to (11,111+11,111=22,222). On September 23, 2015, the company once again announced a bonus share of 1:1, bringing the total number of shares you hold to (22,222+22,222=44,444). The return on your whole investment would have reached ₹15.90 Cr based on the stock price as of today (44,444 shares x current market price ₹3,578).
Divi's Laboratories Q1FY23 Results
In Q1FY23, the firm reported a net profit of Rs. 702 crore, up from Rs. 557 crore in Q1FY22. This represents a YoY gain of 26%. From ₹1,960.6 crore in the same quarter of the previous year, the company's revenue from operations increased by almost 15% to ₹2,254 crore. In the first quarter of FY23, profit before tax (PBT) increased by 4.5% to ₹851 crore from ₹814 crore in Q1FY22. The company's overall income grew by 17% year over year to ₹2,342 Cr in Q1FY23 from ₹1,996 Cr in Q1FY22. The company's total expenses in Q1FY23 were ₹1,491 Cr, up from ₹1,182 Cr in Q1FY22. The company's EPS jumped to 26.44 in Q1FY23 from ₹20.99 in Q1FY22.
Should you buy the shares of Divi's Laboratories?
The research analysts of the broking firm Sharekhan have said in a note that “In its annual report for FY22, Divis Laboratories (Divis) has mentioned of the challenges confronted in FY22 on the back of Covid pandemic, which impacted business across markets. Also the escalation of geopolitical conflict compounded the crisis and brought numerous other challenges in the form of strained trade relations, a steep increase in the inflation and unprecedented volatility in commodity costs. Though the pandemic posed challenges but it has also accelerated significant change in the healthcare ecosystem, making it more adaptable and innovative so as to with stand any sudden changes. Divis, basis its strong customer connects and capabilities has been able to benefit from the opportunities that has emerged. Further, Divis is better prepared to handle the evolving demand, continuous market volatility and an uncertain economic environment. The company plans to focus on the continuous process of innovation and green chemistry implementation to strengthen its overall position."
They further added that “Divis in its annual report has mentioned transient challenges in the form of demand uncertainties and cost pressures, while the long-term growth prospects stay intact and could propel the growth. Established capabilities, backward integration, focus on quality, and benefits of scale coupled with major capacity expansion plans commencing, are the positives that could support growth. However, given the cost headwinds including higher raw material costs, freight costs, and power costs, could overweigh on the performance in the near term. At CMP, the stock trades at valuations of 35.3x/30.7x its FY23E/FY24E EPS, respectively, while there are apparent near-term concerns, long-term growth levers are intact, hence we maintain a Buy recommendation on the stock with unchanged PT of ₹4450."
The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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