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Karvy Stock Broking
Divi’s Lab (Hold)
CMP: Rs 1,021.50
Target: Rs 1,190
Divi’s results were below expectation in terms of margins and profits. Gross margins took a hit due to generics having a greater contribution to the business. The company maintains 20-25 per cent revenue growth for FY13E and FY14E. Divi’s revenues increased 28 per cent y-o-y to Rs 534.4 crore as against our expectations of Rs 552.5 crore. Generics were 53 per cent of revenues and Carotenoids were at Rs 19 crore, lower than our expectation of Rs 30 crore. We broadly maintain our revenue estimates for FY13E and FY14E. We downgrade our EBDITAM from 39.6 per cent to 37.8 per cent for FY13E and from 39.1 per cent to 37.7 per cent for FY14E. We downgrade our EPS estimates by 3.6 per cent to Rs 47.9 for FY13E and by 2.3 per cent to Rs 59.5 for FY14E.
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