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Anand Rathi
Divis Laboratories (Buy)
Target: ₹4,095
CMP: ₹3688.90
Divis Laboratories is one of the leading manufacturers of Active Pharmaceutical Ingredients (API) in the world. Growth prospects of Divis look decent, with favourable traits in the API industry due to supply chain readjustments/ diversification from China into other countries, including India, amid the Covid-19 pandemic.
During Q2-FY21, the company delivered strong numbers, with a revenue growth of 21 per cent y-o-y at ₹1,749.30 crore. EBITDA margins improved to 42.4 per cent from 33.9 per cent in Q2-FY20. PAT jumped 46 per cent to ₹519.60 crore.
Divis has completed de-bottlenecking/backward integration for intermediates to reduce dependency on supplies of raw materials from China and completed several utilities expansion projects as well.
It has announced the commencement of construction of Divis Unit-III facility at Kona Forest, East Godavari, Andhra Pradesh . The company will be investing about ₹1,500 crore out of its internal accruals in phased manner for the facility.
We remain positive on Divis, given its strong market position, strength in API, established long-term contracts with customers and benefit from its capex programmes.
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