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Systematix Research Report
Divi's Laboratories Ltd.'s Q3 FY23 net earnings at Rs 3,068 million declined 38% QoQ (29%/37% below our/consensus estimates) as the company faced 958 basis points QoQ compression in Ebitda margin.
A large part of the decline was due to zero Molnupiravir sales in Q3 FY23, which contributed significantly to margins in the preceding quarters. Hence, Q3 FY23 can be considered as the new base.
Margins were even lower than pre-Covid levels, as Divi's faced price erosion and input cost inflation. The generics business grew 12% YoY, primarily on higher volumes, and the company is confident of maintaining double-digit volume growth in its generics portfolio.
Divi's custom synthesis business fell 58% YoY as Molnupiravir sales completely phased out this quarter. We expect pressure to ease a bit on the custom synthesis front, as the company is looking to commercialise two fast track non-Covid projects.
Supply of iodinated contrast media products too could start contributing to its revenues in Q1 FY24, though a full potential ramp up could take some years.
Divi's has been allotted the much-awaited 500 acres of land at Kakinada to develop its Unit III manufacturing facility. We believe this facility would start contributing to revenues FY26-FY27 onwards.
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