Q3FY21 Result Update - Divi's Laboratories - ICICI Direct

Divi's reported a strong Q3FY21 performance. Revenues grew 21.9% YoY to Rs. 1701 crore (I-direct estimate: Rs. 1770 crore). Generic segment grew 21% YoY to Rs. 876 crore. Custom synthesis grew 18.9% YoY to Rs. 681 crore. Carotenoids grew 45.0% YoY to Rs. 145 crore. EBITDA margins expanded 525 bps YoY to 40.6% (I-direct estimates of 39.5%) due to significantly better gross margin performance (up 824 bps YoY to 69.0%) partially offset by higher staff costs. Subsequently, EBITDA grew 39.9% YoY to Rs. 691 crore (I-direct estimate: Rs. 699 crore). PAT grew 31.1% YoY to Rs. 471 crore (I-direct estimate: Rs. 492 crore) in-line with strong operational performance.

Valuations & Outlook

Q3 results were mostly in line with I-direct estimates on all fronts. More than strong quarterly performance (the management stresses 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. 3700 crore [Rs. 1800 (existing plans) + Rs. 400 (custom synthesis blocks) + Rs. 1500 crore (greenfield Kakinada plant)], over and above ~Rs. 2000 crore spent in last five years. Impact of the massive investment is already visible & expected to reflect in FY22-23. Divi's stays a quintessential play on Indian API/CRAMs segment with its product offering, execution prowess. Maintain BUY with TP of Rs. 4440 (vs. earlier Rs. 4425) based on 40x FY23E EPS of Rs. 111.0.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_DivisLab_Q3FY21.pdf

Shares of DIVI'S LABORATORIES LTD. was last trading in BSE at Rs.3781.65 as compared to the previous close of Rs. 3819.75. The total number of shares traded during the day was 98411 in over 7767 trades.

The stock hit an intraday high of Rs. 3886 and intraday low of 3700. The net turnover during the day was Rs. 372804329.

Source : Equity Bulls

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