Divi's Laboratories - Result Update - ICICI Securities

Q4FY20 revenues grew 10.6% YoY to Rs. 1389.7 crore due to strong growth in generics and custom synthesis business partially offset by a decline in carotenoid segment. EBITDA margins fell 74 bps, 339 bps YoY, QoQ, respectively, to 32.0% due to higher employee & other expenditure. This virtually nullified strong GPM performance. EBITDA grew 8.1% YoY to Rs. 444.5 crore. PAT grew 34.2% YoY to Rs. 388.2 crore. Delta vis-a-vis EBITDA was due to higher other income (forex gain), lower tax rate (tax reversals).

Valuations & Outlook

Q4 results were a mixed bag. While revenue was in line with I-direct estimate, EBITDA margins were lower due to higher employee & other expenditure stemming from commercialisation of DCV SEZ facility. More than the results, important narrative for Divi's is the unprecedented capex it undertook a few quarters back and is likely to complete by H2FY21. In order to further augment capacities besides preparing for growing opportunities arising due to China factor, the company has earmarked an aggressive capex of ~Rs. 1700 crore (including Rs. 300 crore for backward integration), over and above ~Rs. 2000 crore spent in the last five years. We expect the full-blown impact of this massive investment to fructify from FY22 onwards (after considering the time lag for regulatory inspections). We ascribe a target price of Rs. 2355 based on 32x FY22E EPS of Rs. 73.6.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_DivisLab_Q4FY20.pdf

Shares of DIVI's LABORATORIES LTD. was last trading in BSE at Rs.2412.5 as compared to the previous close of Rs. 2460.45. The total number of shares traded during the day was 53159 in over 4516 trades.

The stock hit an intraday high of Rs. 2498 and intraday low of 2338.65. The net turnover during the day was Rs. 126606580.

Source : Equity Bulls

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