Divis Laboratories share price: Ashis Biswas of CapitalVia puts Target Price at Rs 3770; Sharekhan says THIS about the pharma stock

Divi’s Laboratories share price today is Rs 3610, down by Rs 13 or 0.35%. Divi’s Laboratories share price has moved to Rs 3610 from Rs 3425, up nearly 5% or Rs 185. Ashis Biswas, Head of Technical Research at CapitalVia Global Research highlights Fundamentals and Technical Analysis on Divi’s Laboratories. The target price on Divi’s Lab is Rs 3770. In addition to having a solid base in the industry, Divi's Laboratories is extending its product offerings in the generic API segment, developing 16 additional APIs to lead the next phase of growth and the subsequent DMF filing.

CapitalVia Global Research says that despite iodine-based drugs' complexity, Divi's Laboratories' good chemistry skills and experience in the Contrast Media room have enabled it to take the Iohexol API through the validation phase. 

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Divi’s Laboratories has more than doubled its capacity and is poised to take advantage of carotenoids' growing market. Divi’s Laboratories is well poised to take advantage of the carotenoid opportunity, with a 21% revenue CAGR to Rs 8 bn forecast over FY20–23, attributes to solid demand, product offerings, and advanced manufacturing.

Ashis said that during FY18–20, Divi’s Laboratories more than doubled its revenue in the Carotenoids industry to Rs 4.4 bn (8% of sales) and saw a 22% YoY rise in 9M FY21. With a CAGR of 4%, the global carotenoid market is worth USD 1.5 bn by 2026. Technically with a break of the downward sloping trend line, the stock has generated a buy signal for next week.

Sharekhan says that Divis Laboratories is expected to benefit from strong growth likely in the global active pharmaceutical ingredients (API) space, driven by multiple factors. Increasing preference for biologics for disease management, key drugs going off patent, outsourcing opportunities and higher regulatory approvals would be key growth drivers for the API industry, which is expected to report a high single-digit CAGR over the next 6-7 years. In addition to this, there are immense opportunities that have emerged for API players such as Divis Laboratories, as pharma giants across the world look to tide over the pandemic. Supply reliability and quality are factors that have taken precedence over pricing, which pharma companies’ world over are looking for.

Sharekhan says that Divis Laboratories is planning to invest Rs 600 cr towards the Kakinada plant over the next 2-3 years, but the work is expected to commence post resolution of the issues with locals. Of the Rs 400 cr capex announced for the custom synthesis business, Divis Laboratories has commenced production at one stream and is on track to achieve completion for others. The fact that the company has lined up substantial investments towards capacity expansion points towards strong growth visibility.