Divi’s Labs Q2 preview: Firm to maintain momentum, PAT to grow in double digits

NEW DELHI: In line with most of its peers, Divi’s Laboratories is likely to report double digit growth in revenue and profits during the September quarter, according to analysts tracking the scrip. The company is scheduled to announce its numbers on Saturday.

The biggest factors driving growth during the quarter will be improved demand for Active Pharmaceutical Ingredient (API) products while capacity expansion will also help the cause. However, demand normalisation is likely to be a drag.

“We expect Divi’s Lab to continue its growth streak with top-line growth expected at 15 per cent YoY, however decline 4 per cent QoQ on demand normalisation. Gross margin is likely to improve 300bps YoY to 62 per cent on favourable base, however remain stable QoQ,” said analysts at Edelweiss Research.

The broker expects net profit at Rs 441.2 crore.

The analysts added that Ebitda margins are expected to improve 290bps YoY to 37 per cent, benefitting from backward integration of starting material, China disruption and de-bottlenecking activities.

The drugmaker reported an 80.61 per cent rise in consolidated net profit at Rs 492.06 crore for June quarter, mainly on account of robust sales. While in the September quarter last year, its profit stood at Rs 356.78 crore.

“Revenues are expected to grow 16 per cent YoY to Rs 1,679 crore on the back of steady growth in the generic and custom synthesis segment. Ebitda margins are expected to improve 256 bps to about 37 per cent YoY mainly due to better gross margins due to a change in the product mix and backward integration,” said ICICI Securities.

The brokerage house said net profit is expected to grow 25.6 per cent YoY to Rs 448 crore in line with operational performance.

Divi’s Labs has been one of the best performing pharma companies this year, as far as market returns are concerned. It has run up nearly 74 per cent year to date while one-year returns stand at 90 per cent.

Phillip Capital said improved global demand for APIs , manufacturing support and capacity expansion will lead a sales growth of 15 per cent. “Higher capital cost due to largest ever Capex will restrict earnings growth of 18 per cent,” it added.

The broker pegs revenue at Rs 1,656.9 crore, up 14.6 per cent YoY and profit at Rs 417.9 crore, up 18.2 per cent.

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