Divi’s Labs Q3 Results Review - Weak Performance; Custom Synthesis Pipeline Shaping Up Well: Systematix

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Systematix Research Report.Divi's Laboratories Ltd.'s Q3 FY24 earnings were weaker than expectations as revenue growth was weak (8.6% YoY). The contribution from custom synthesis business expanded on a QoQ basis and aided gross margin expansion by 313 bps. Raw material prices were also softer. Company expects to expand the custom synthesis business led by multiple opportunities. They are currently running validation batches for contrast media products and building block peptides for GLP-1 based products and commercialization will take around a year. Divi's believes the custom synthesis opportunities should be accretive to the gross margin and they are prepared with manufacturing capacities to be able to execute on initial forecasted demand from these opportunities. On the generics front, they are expecting to tap into opportunities arising from patent expiries that should begin 2025 onwards. The active pharma ingredient for these potential patent expiry opportunities has been developed and the company is backward integrated on these products to optimize their costs and hence be able to successfully monetize. Our current forecasts bake in 13% growth in revenue which we believe should adequately cover the upside expected from these opportunities. While these new opportunities add on the base, two large custom synthesis opportunities in the current revenue base also face erosion risk owing to risk of generic competition and hence pose risk to the potential growth. We tweak our forecasts on Divis and roll over our target price to FY26E earnings per share. Our new target price stands at Rs 2,541 and have a sell rating at current market price. We expect Divis to deliver revenue / Ebitda/profit after tax compound annual growth rate of 13% / 22% / 24% over FY24E to FY26E..Click on the attachment to read the full report:.Divi's Lab Q3 Results: Profit Rises But Misses Estimates, Revenue Up 9%.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Divi’s Labs Q3 Results Review - Weak Performance; Custom Synthesis Pipeline Shaping Up Well: Systematix

The softening of raw material prices and a favorable product mix has helped gross margin to improve.

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