Divi’s Laboratories’ scale new 52-week high after 6% gains post Q4 results; brokerages split on stock outlook

Shares of the pharma company Divi's Laboratories gained traction in Monday's trade (May 27) after the company posted stronger-than-expected Q4FY24 results on Saturday. 

After gaining nearly 6 per cent to a new 52-week high price of Rs 4,356.85, shares of the pharma major traded higher by over 4 per cent at Rs 4,294.35 apiece on the BSE at the last count.

The company’s consolidated net profit reported a 68 per cent year-on-year (YoY) rise to Rs 538 crore as against Rs 321 crore in the corresponding quarter last year. Zee Business research desk estimated the company’s profit to come in at Rs 427 crore.

The revenue at the company was recorded at Rs 2,303 crore against estimates of Rs 2,058 crore in the reporting quarter. This was a 18 per cent YoY increase in comparison to the previous year’s figure of Rs 1,951 crore. EBITDA also gained a sharp 50 per cent on-year to Rs 731 crore. It was recorded at Rs 487 crore in the same period last fiscal year.

Meanwhile, margins at the pharma major saw an expansion to 31.7 per cent from 25 per cent in the same quarter last year.

For the FY25, the company expects double-digit topline growth. Adjusted for Covid, the company witnessed double-digit topline growth in FY2024 as well. The six growth engines are slowly materializing. The company’s six growth engines being talked about are generics, increased capacities for existing generic molecules,  Sartans, contrast media,  custom synthesis projects and  new generic projects.

Here’s how global brokerage view Divi’s Laboratories post Q4FY24 results

Global brokerage maintains a ‘hold’ view on the stock and has raised the target to Rs 4,050 from the earlier Rs 3,610, signifying a downside of over 1 per cent from the last close. The brokerage said that the company’s Q4 were ahead of estimates as custom synthesis sales surged by 47 per cent on year. The segment benefited due to Q4 seasonality as well as two commercial contracts aiding Q4 EBITDA margin to scale to multi-quarter high levels. The brokerage believes the company looks set to spring back to its growth path. Further, it sees the company's growth path factored into the stock, which is trading at 41x FY26 PE valuation.

Goldman Sachs also continued with its ‘neutral’ call on the stock and raised the target to Rs 4,020 from Rs 3,640 earlier. It also maintained that its custom synthesis segment drove Q4 beat.