Shares of Divi's Laboratories are under sharp market focus as top foreign and domestic brokerages hiked their target prices following a stellar performance in the first quarter (Q1). Strong momentum in Custom Synthesis Manufacturing (CSM), robust EBITDA margins, and a bullish outlook on peptides and contrast media have triggered positive revisions across the board.
While global majors Citi and Goldman Sachs maintained their 'Buy' ratings-with Citi naming Divi's its top India pharma pick-domestic firm Kotak Securities retained its 'Sell' rating, advising investors to wait for a more favorable entry point despite acknowledging the company's strong operational performance.
Citi Retains Divi's as Top India Pharma Pick; Hikes Target to Rs 11,700
Maintaining its strong bullish stance, Citi upgraded its target price on Divi's Laboratories to Rs 11,700 from Rs 9,450, reiterating a 'Buy' rating.
Citi highlighted that product validation is driving a strong operational beat and noted that scaling commercial volumes could fundamentally transform the company's earnings trajectory.
Key highlights from Citi:
- Earnings Revision: Raised earnings estimates by 8% to 15% following strong Q1 figures.
- Margin Outlook: Anticipates margins will remain elevated due to favorable product mix.
- Key Growth Drivers: Highlighted strong management commentary on high-margin segments including peptides, contrast media, and generic APIs.
Top Sector Pick: Retained Divi's Laboratories as its preferred stock within the Indian pharmaceutical coverage.
Goldman Sachs Points to Revenue Growth Inflection; Raises Target to Rs 9,070
Global brokerage Goldman Sachs maintained its 'Buy' recommendation on Divi's Labs while lifting its target price to Rs 9,070 from Rs 8,025.
According to Goldman Sachs, the company's Q1 results beat market expectations primarily due to outperformance in Custom Synthesis, alongside stabilization in the core generics business.
Key highlights from Goldman Sachs:
- Revenue Inflection: Custom Synthesis is leading a broad revenue growth inflection while generics show signs of stabilizing.
- Margin Expansion: Operating leverage and an improved product mix are expected to drive further margin uplift.
- Capex Intensity: Sustained capital expenditure will ensure long-term business sustainability and capacity readiness for upcoming commercial supplies.
Kotak Securities Raises Target to Rs 6,925, Keeps 'Sell' on Valuation Concerns
Taking a more conservative approach, Kotak Securities maintained its 'Sell' rating on the stock, citing rich valuations, but increased its target price to Rs 6,925 from Rs 5,850.
Kotak acknowledged that Divi's delivered a material operational beat in Q1, backed by robust CSM sales and a stellar EBITDA margin of 40.7%.
Key highlights from Kotak Securities:
- Commercialization Progress: The company is moving closer to full-scale commercialization of key pipeline projects.
- Peptides Focus: Eyes remain on commercial supply rollouts for peptides and other complex API projects.
- Stance: Recommends investors await a better entry point, as current stock price levels factor in much of the near-term upside.
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