Divi's Laboratories - Q2FY21 Result Update - ICICI Direct

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.

Valuations & Outlook

Q2 revenues were in-line with I-direct estimates whereas profitability was better due to better-than-expected operational performance. More than strong quarterly performance (management stresses that in a business like this can be lumpy) important narrative for Divi's is unprecedented capex to further augment capacities besides preparing for growing opportunities arising from China plus one factor. It has earmarked aggressive capex of ~Rs. 2800 crore [Rs. 1800 (existing plans) + Rs. 400 (custom synthesis blocks) + Rs. 600 (greenfield Kakinada plant) crore], over and above ~Rs. 2000 crore spent in last five years. Impact of this massive investment is already visible and is expected to reflect in FY21-22. 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.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_DivisLab_Q2FY21.pdf

Shares of DIVI'S LABORATORIES LTD. was last trading in BSE at Rs.3445.6 as compared to the previous close of Rs. 3432.2. The total number of shares traded during the day was 4248 in over 548 trades.

The stock hit an intraday high of Rs. 3460 and intraday low of 3440.4. The net turnover during the day was Rs. 14646470.

Source : Equity Bulls

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