Divi's Labs Q1 Review — Motilal Oswal Retains 'Neutral' Stance, Says Current Valuation Leaves Limited Upside

Divi’s Laboratories posted lower-than-expected financial performance in Q1 FY26. Revenue/Ebitda/PAT came in 5%/14%/18% below our estimates, affected by lower traction in the generics segment and increased opex. Having said this, Q1 FY26 was the seventh consecutive quarter of robust YoY growth in earnings.

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Motilal Oswal Report

We cut our earnings estimates of Divi's Laboratories Ltd. by 8%/6% for FY26/FY27, factoring in-

1. the current pricing pressure in the generics segment,

2. incremental opex related to new projects, and

3. revenue being back-ended.

We value Divi's at 54x 12 months forward earnings to arrive at a target price of Rs 6,320.

We estimate 20% earnings CAGR over FY25-27 on the back of improved business prospects in the CS segment as certain contracts are currently undergoing pilot study/qualification and subsequently expected to scale up to the commercial level.

Notably, peptide is expected to be the next breakthrough opportunity for Divi's.

However, the current valuation leaves limited upside; hence, we maintain Neutral stance on the stock.

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