Divi's Lab Share price: Anand Rathi positive, says BUY, target price Rs 4095 | Here is what you need to know

Anand Rathi remains positive on Divi’s Lab given its strong market position, strength in API manufacturing, established long-term contract with customers and benefit from its capex programs. Therefore, Anand Rathi has maintained BUY rating with a revised target price of Rs. 4095.
 
Divi's Laboratories is one of the leading manufacturers of Active Pharmaceutical Ingredients (API) in the world. Growth prospects of Divi’s look decent with favorable traits in the API industry due to supply chain readjustments/ diversification from China into other countries including India amid the COVID-19 pandemic. As global players are looking to reduce dependency on China and preferring India, companies like Divi’s remain well placed to capitalize on such opportunities. Also, in custom synthesis, the company is connected with several pharma giants and looks to benefit as India may tap opportunities in terms of the consumption of custom synthesis.
 
During Q2 FY21, the company delivered strong numbers with a revenue growth of 21% y/y to Rs 17493 mn. EBITDA margins improved to 42.4% from 33.9% in Q2 FY20. PAT jumped 46% y/y to Rs 5196 mn.
 
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As part of its capex program, Divi’s has completed debottlenecking/backward integration for intermediates to reduce dependency on supplies of raw materials from China and completed several utilities expansion projects as well.
 
On Dec 1, 2020 the company announced the commencement of construction of Divi’s Unit-III Facility (the Project) at Kona Forest, Ontimamidi Village, Thondangi Mandal, Near Kakinada, East Godavari District, Andhra Pradesh from Dec 7, 2020. The company will be investing about Rs 1500 cr out of its internal accruals in phased manner for the implementation of its Unit III facility. Management expects to commence operations within 12 to 18 months for 1st phase of the Project.