Divi’s Labs shares decline over 6% after Q4 results

Shares of Divi’s Laboratories fell over 6% on Tuesday, despite a robust performance, after analysts warned that growth looks unsustainable as the pandemic has eased globally. The stock declined as much as 6.35% to hit an intraday low of Rs 3,650. It has slipped over 14% in the past two trading days.

On Tuesday, the stock closed 234.00 points or 6.00% down
at Rs 3,663.90.

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Divi’s Labs’ consolidated net profit increased by 78% to Rs 895 crore in the quarter that ended on March 31, 2022. The company had posted a net profit of Rs 502 crore in the March quarter of the financial year 2020-21.

The drugmaker’s consolidated revenue from operations grew 41% to Rs 2,518 crore in the March quarter from Rs 1,788 crore in the year-ago period. EBITDA grew 54% year on year to Rs 1,104 crore, while margins improved 380 basis points (bps) YoY to 43.9% mainly due to lower employee and other expenditures. The performance was largely led by strong traction in the custom synthesis (CS) segment.

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For 2021-22, the company posted a consolidated net profit of Rs 2,960 crore as against Rs 1,984 crore in the previous financial year.

Revenue from operations jumped to Rs 8,960 crore in 2021-22 as compared with Rs 6,969 crore in 2020-21.

The company recommended a dividend of Rs 30 per share of face value of Rs 2 (1,500%) for 2021-22.

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Motilal Oswal Financial Services lowered its FY23/FY24 EPS estimate by 11%/14%, factoring in reduced sales of COVID-related products, considering the low number of cases globally, a gradual uptick in growth in the generics segment, and delay in implementation of Kakinada capex.

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“More than strong quarterly performance, the important narrative for Divi’s is its unprecedented capex plans to further augment capacities besides preparing for growing opportunities arising due to the China-plus-one factor. It has earmarked an aggressive capex of around Rs 2,000 crore (including the greenfield Kakinada plant) over the next two years in order to take a chunk of – $20 billion opportunity of APIs going off-patent over FY23-25,” ICICI Securities said in a note. Divi’s remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess, the brokerage firm said.