Divi's 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. Divi's Laboratories share price today is Rs 3518, up Rs 22 or 0.6%.

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In addition to this, there are immense opportunities that have emerged for API players such as Divi's 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. 

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Moreover, the company has identified new areas, which would fuel growth going ahead. Divi's has identified its next set of 10 molecules, which have gone off patent and offer a sizable growth opportunity. Moreover, the company is aggressively foraying in the contrast media space, which offers a potential market size of $4 billion- $6 billion. Secondly, the company has concluded its Rs 1800 cr capex plan at DC SEZ and DCV SEZ coupled with de-bottlenecking existing capacities, which provide ample visibility to cater to increased demand and in the process would lead to operational efficiencies.

Divi's 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, Divi's 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.

Divi's Laboratories strict adherence to IPR norms, proven delivery capability through the development cycle, commercial supply track record, and strong relationship with pharma majors are key advantages. Sharekhan believes Divi's Laboratories could also benefit from its backward-integration initiatives and planned new product launches. Sales and profit are expected to post a sturdy 26% and 36% CAGR, respectively, over FY2020-FY2023.