Accumulate Divi's Laboratories - Dolat Capital

We expect the Custom Synthesis (CS) & API division to grow by 20% CAGR over FY12-14E, aided by ramp up in Vizag SEZ operations. The FDA approval for the location is expected in Q1FY14.

- The company's inherent chemistry skills positions it well as a strong player in custom synthesis exports and on another hand a dominant API supplier to the innovators with relentless focus on generating highyields. Divi's has kept itself from entering the formulation business, which adds comfort to its clients.

- The company has created an extensive portfolio of carotenoids like Astaxanthin, Canathaxanthin, Apocarotenal. We expect the segment sales to reach Rs.2bn in FY14E and contribute 7% of the total sales aided by gradual volume off-take.

- We expect 22% revenue growth over FY12-14E; while Debt free balance sheet and controlled Capex enables Divis to generate healthy cash flows.

At CMP of 1175, the stock trades at 24.5x FY13E and 19.4x FY14E earnings. Recommend Accumulate, with target price of 1271 (21x FY14E EPS).

Source : Equity Bulls

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