Divi’s Laboratories Q4 Results Review: Systematix Retains 'Sell' On Rich Valuations

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Systematix Report

Divi’s Laboratories Ltd. Q4 FY25 revenues (Rs 25,850 million), Ebitda (Rs 8,860 million) and Net earnings (Rs 6,620 million) outpaced our and consensus expectations led by 12.5% YoY revenue growth in the custom synthesis and generic segment. The generic business growth which was subdued until now rebounded in Q4 FY25.

The custom synthesis also grew double digit YoY, contributing 51% of Q4 revenue. CS business should remain on a double-digit growth trajectory led by ongoing expansion in capacities for contrast media, commercialization of peptide/GLP-1 contract research and manufacturing service supplies by end of CY26/early CY27 and ramp up in recently commercialized CRAMS projects.

The growth from these new avenues should partially be offset by an expected decline in one of their largest CRAMS assets owing to patent expiry in June 2025.

During the quarter, generic business pricing and volumes remained stable, and Divis's expects launch of new products to support growth. The generic segment accounted for 49% of Q4 revenue. Overall Divi's expects to grow double digit going forward and the capex at Kakinada should support the growth opportunity.

We have revised our forecasts considering the better-than-expected performance in the generics segment. Based on our revised estimates, we arrive at a price target of Rs 4,500, however we retain a Sell rating on Divi's owing to rich valuations. Global peers like Lonza and Wuxi Apptec trade at 4.5x and 2.7x EV/Sales on FY27 estimates, as compared to 12.6x for Divis.

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