Divi’s Laboratories shares slip over 15% in 2 sessions, hit new 52-week low despite strong Q4 earnings – Brokerages list reasons

Slipping for the second straight session, shares of pharma major Divi’s Laboratories plunged over 15 per cent in the last two days on the BSE despite registering better-than-expected March quarter results in FY22, with the highest-ever quarterly sales and EBITDA. 

The stock on Tuesday slipped almost 6.5 per cent to touch a new 52-week low of Rs 3650 per share on Tuesday. It breached its earlier low of Rs 3,790 touched on January 24, 2022.  

Global brokerage house Jefferies said the March quarter was flat on a sequential basis, and the financials of Divi’s Lab are likely to be under pressure as Molnupiravir sales dry up. It maintained and Underperform rating reducing the price target to Rs 3535 per share on the counter. 

The Q4FY22 performance of Divi’s beat ICICI Securities estimates across parameters. Consolidated revenues grew 40.8% YoY to Rs 25.2 bn, EBITDA margin improved 380 bps YoY to 43.9% and adjusted PAT grew 78.2% to Rs 8.9 bn. 

The domestic brokerage remained cautious on near-term outlook due to elevated costs and pricing pressures in API segment coupled with waning covid opportunities. However, maintained an ADD rating with a revised target price of Rs 4,361 per share (12% upside) based on 38x FY24E EPS. 

Divi’s delivered another robust show in Q4FY22, almost entirely led by Molnupiravir, Kotak Institutional Equities said. “Recovery in generic APIs is unlikely to help bridge this gap soon resulting in flattish EPS over FY2022-24E.” 

Despite the recent correction, valuations remain elevated with Divi’s witnessing a lower derating versus its global peers in FY2022, the brokerage said retaining Reduce rating with a target price of Rs 3,500 per share from Rs 3,900 per share earlier.