Divi’s Laboratories Ltd is a large cap company in the pharmaceuticals industry with a market valuation of ₹98,972.00 Crore. Divi’s, a leading manufacturer of Active Pharmaceutical Ingredients (API), exports goods to over 95 countries. Additionally, Divi’s has accomplished the achievement of being among the top three API producers globally and top API businesses in Hyderabad. Divi’s Laboratories is currently debt-free, according to data from Value Research, which may be of interest to investors. Divi’s Laboratories is an unusual example of a company that has made investors crorepati over the previous 19 years, which adds to its allure.
Share price history of Divi’s Laboratories
Shares of Divi’s Laboratories Ltd. traded at 3,721.10 on Friday, down 5.75% from the previous close of 3,948.05. A multibagger return and an all-time high of 41,245.56% were achieved by the stock price, which increased from $9 on March 13, 2003 to the amount it is at right now. A Rs.1 lakh investment in Divi’s Laboratories shares 19 years ago would be worth around Rs.4.13 crore now. Over the past five years, the stock price has increased from 635.20 as of August 18, 2017, to the current price level, reflecting a multibagger return of 485.82%.
On the other hand, the stock has dropped 24.04% over the past year and 20.00% throughout the course of the year. On the NSE, the stock reached a 52-week high of Rs.5,425.10 on October 18, 2021, and a 52-week low of Rs.3,365.55 on May 26, 2022. As of right now, the stock is trading at a price of Rs.3,721.10, which is 31.40% below its 52-week high and 10.56% above its 52-week low.
Divi’s Laboratories Q1FY23 results
Divi’s Laboratories has earned a total income of ₹2343 crores in Q1FY23 on a consolidated basis as against ₹1997 crores for the corresponding quarter of last year, a YoY rise of 17.32%. On a consolidated basis, the company reported a Profit before Tax (PBT) of ₹851 crores as against a PBT of ₹814 crores for the corresponding quarter of the last year, a YoY growth of 4.54%. The company earned a Profit after Tax (PAT) of ₹702 crores on a consolidated basis for the current quarter as against a PAT of ₹557 crores for the corresponding quarter of the last year, a YoY growth of 26.03%.
Consolidated, the currency gain for the most recent quarter was 56 crores as opposed to 20 crores in Q1FY22. Additionally, on a standalone basis, the company’s total sales climbed by 15.50% YoY to 2294 Cr in Q1FY23 from 1986 Cr in Q1FY22. The company reported a standalone PBT of Rs.844 million, up from Rs.814 million in Q1FY22, reflecting a YoY increase of 3.68%. The company reported a PAT of 692 Cr, up from 552 Cr in Q1FY22 and reflecting a YoY increase of 25.36%.
Should you invest in Divi’s Laboratories stock?
The research analysts of the broking firm Sharekhan have said in a note that “Divis Laboratories’ (Divis) Q1FY23 results were a mixed bag and reflected the higher operating costs while lower tax rate resulted in a double-digit PAT growth. The revenue grew strongly in double digits backed by benefits from expanded capacities, the PAT due to lower tax rate too grew in double digits. The results missed estimates. The management commentary pointed at healthy demand, well supported by capacity expansion plans, which would drive top line growth for the company, however the management expects elevated cost pressures to sustain going ahead as overall costs including raw material, freight costs and power costs are at higher levels. This could weigh on performance in the subsequent quarters. Though Divis has implemented cost-control measures in the form of backward integration and debottlenecking of existing facilities and these could play out over the medium to long term.”
“Divis’ growth prospects across its business stay bright and will propel growth over the long term. Established capabilities, backward integration, focus on quality, and benefits of scale coupled with major capacity expansion plans commencing, are the positives that could support growth. However, given the cost headwinds including higher raw material costs, freight costs, and power costs, could overweigh on the performance in the near term. At CMP, the stock trades at valuations of 36.7x/31.9x its FY23E/FY24E EPS, respectively, while there are apparent near-term concerns, long-term growth levers are intact, hence we maintain a Buy recommendation on the stock with a revised PT of ₹4450,” said the research analysts of the broking firm Sharekhan.
The research analysts of the broking firm ICICI Securities said “Divi’s share price grew by ~2.3x over past three years. Maintain BUY as the company remains a compelling bet as a structurally well positioned customs synthesis and API company, even after a possible flattish year ahead on a high base in FY22 while some near term margin pressure is transitory in nature. Valued at ₹4315 i.e. 38x P/E on FY24E EPS of ₹113.5.”
The company has been expanding its capacity in a few more specialised APIs in response to changing market conditions brought on by “China plus one” opportunities and upcoming market size of approximately US$20 billion in molecules going off-patent over FY23–25. The company has also made progress in six identified growth areas, including commercialization of new APIs, multipurpose facility for custom synthesis, and progress on 1) new DMF filings & 2) contrast media APIs, and progress on Kakinada greenfield project (planned outlay of 1000-2000 crore) are the key triggers for the future price performance of Divi’s Laboratories.
