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Motilal Oswal Report
We recently met Divi's Laboratories Ltd. management to understand the business outlook. Below are the key takeaways:
The cost pressures are easing across major factors, indicating improved profitability going forward.
The outlook for contrast media segment remains encouraging, given Divi's capability to have better Iodine recovery and limited investment by formulators to manufacture active pharma ingredient.
The green-field capital expenditure at Kakinada would not only cater to the company's growth requirements from FY25 onwards, but also, would reduce the concentration of Divi'sI business at Hyderabad/Vizag.
While the improvement in outlook is encouraging, the valuations remain high, considering the flat earnings growth in FY24 (43 times FY24E earnings/33 times FY25E earnings).
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