Divi's Laboratories - March 2013 Results Preview - Motilal Oswal

- Divi's Laboratories (DIVI) is likely to post 14% YoY increase in 4QFY13E revenue to INR8.1b on increased capacity utilization at the new SEZ unit. CCS business would grow 5% YoY, while API business is likely to grow 26% YoY. Carotenoids revenue would stand flat YoY.

- EBITDA is likely to grow by a mere 2% YoY to INR2.89b, impacted by higher other expenses due to high power cost. EBITDA margin would contract 420bp YoY, but increase 180bp QoQ.

- We expect adjusted PAT to remain flat YoY at INR2.17b, mainly impacted by subdued operational performance.

We expect DIVI to be a key beneficiary of increased pharmaceutical outsourcing from India, given its strong relationships with global innovators and strong chemistry skills. We estimate 35-37% RoCE and 28-29% RoE over FY13E-15E, led by traction in high margin CRAMS business, sustained profitability in generics business and increased contribution from the new SEZ. The stock trades at 17.4x FY14E and 13.8x FY15E earnings. Maintain Buy.

Source : Equity Bulls

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