LIC’s shareholding in Divi’s Lab crosses 5%; stock down 13% in 2 sessions – brokerages recommend this

LIC’s shareholding in Divi’s Lab crosses 5%: Insurance behemoth Life Insurance Corporation of India (LIC) has crossed 5 per cent shareholding in Divis Laboratories as the state-owned insurer purchased additional shares in the drug maker for Rs 35.82 crore, the company said in its exchange filing on Wednesday.

LIC, which is also termed a domestic institutional investor, said stakes in Divis Laboratories have increased from 4.992 per cent to 5.032 per cent as the number of shares held in the company rose from 1,32,54,663 to 1,33,60,663.

The shareholding in the company crossed the 5 per cent mark on November 7, 2022. The acquisition of shares was done at an average price of Rs 3,379.01, LIC said in a regulatory filing.

Also Read: LIC buys extra 2% stake in this Tata Group company Voltas for Rs 635 crore – brokerage recommends Buy, check target price

As a regulatory disclosure norm, listed companies are required to inform the stock exchanges upon a change in shareholding to the tune of 5 per cent and above.

Divi’s Lab on Monday reported mute second-quarter earnings for the financial year 2022-23 (Q2FY23). Revenues de-grew 6.7 per cent year-on-year (YoY) to Rs 1855 crore; EBITDA margins declined 767 basis points YoY to 33.5 per cent due to high energy and transport costs.

While the adjusted profit after declined 18.6 per cent YoY to Rs 494 crore in the July-September quarter of FY23.

Divi’s share price grew by around 5.7 times over the past three years, ICICI Direct said, downgrading the stock from BUY to HOLD as it keeps tabs on future custom synthesis ex-Covid opportunities and execution besides steady generics traction.            

The domestic brokerage set a target price Rs 3685 per share, implying an upside of 8 per cent, and valued the stock at 38x FY24E EPS of Rs 96.9.

Similarly, Motilal Oswal said Divi’s Lab delivered earnings miss in Q2FY23. Reduced traction in Custom Synthesis (CS), coupled with lower operating leverage, resulted in earnings decline for the first time after 12 quarters of a strong performance.

The brokerage also lower P/E multiple to 30x from 33x to factor in lower visibility on Kakinada capex, considering capex to be one of the leading growth indicators for the pharma major. Accordingly, Motilal sets a target price of Rs 3,250 from Rs 4,280 earlier.

Shares of Divi’s Lab have corrected nearly 13 per cent in the last two sessions. The counter on Wednesday touched hits 52-week low of Rs 3275 per share, to eventually close at Rs 3298.15 per share, down over 3 per cent on the BSE.

While shares of LIC closed at Rs 631.20 apiece on BSE, down by 0.33 per cent as compared to 0.25 per cent decline in the S&P BSE Sensex.

With PTI Inputs