Stock in Action – DIVISLAB 09 October

Highlights

1. DIVISLAB's share price has gained over 50% year to date in 2024 making it one of the standout performers in the Indian pharma sector.

2. DIVISLAB's financial performance has shown growth over the past year.

3. DIVISLAB's quarterly earnings report highlighted a continuous decrease in net profit in the last 3 quarters.

4. For DIVISLAB's stock analyst forecasts positive trends for the future.

5. DIVISLAB's share price increased from ₹3527 to ₹5888 between April - October.

6. DIVISLAB stock has outperformed the market delivering over 58.77% returns in the last year.

7. DIVISLAB is currently trading at ₹5,871 showing a 5.87% increase as of 11:40 am on NSE.

8. DIVISLAB is gaining momentum today following the broader market trend. Nifty is currently trading at 25,200 showing a 0.75% increase.

9. Technically, Divis Lab's share price will see immediate support at ₹5,270

10. As per the June quarter filings the company has a 51.89% promoter holding, 21.66% DII holding and 16.16% foreign institutional investor (FII) holding.

Analyst View on DIVISLAB

Citi a well known brokerage firm has started covering Divi's Laboratories with a buy rating and set a high price target of ₹6,400 per share which is the highest target among analysts. This suggests a potential 15% increase in the stock price from its current levels.

Recently, Divi's was removed from Nifty 50 index and replaced by other companies but Citi still sees strong growth potential. One big opportunity is in GLP-1 (Glucagon-like peptide 1) APIs, a product that could bring in $800 million by 2030. Citi believes Divi's will benefit from companies diversifying their supply chains and trusting Divi's with new custom made products.

Citi's profit estimates for Divi's for the years 2026 and 2027 are higher than what other analysts predict mainly due to growth in the GLP-1 and Custom Synthesis (CS) businesses. However, if Divi's doesn't expand its Custom Synthesis business as expected there is a risk with Citi estimating a lower possible share price of ₹5,100 in that case.

Out of 28 analysts who follow Divi's nine recommend buying the stock, six suggest holding it and 13 advise selling.

DIVISLAB Financial

The company reported total sales of ₹2,197 crore for the quarter ending 30 June 2024. This is a decrease of 7.77% compared to the previous quarter when sales were ₹2,382 crore but it is still 18.18% higher than the ₹1,859 crore recorded in the same quarter last year.

Net profit after tax for the latest quarter was ₹430 crore which is a 20.79% increase compared to the same quarter last year.

Return on equity for the stock stood at 12.2%. The return on capital employed (ROCE) stood at 16.5%. These numbers help investors understand how efficiently the company is using its funds to generate profits.

The company's P/E ratio is 90.68, meaning investors are paying 90.68 times the company's earnings per share. Its P/B ratio is 10.83 indicating the stock is priced 10.83 times higher than the company's book value per share.

About DIVISLAB

Divi's Laboratories is a major Indian pharmaceutical company known for manufacturing active pharmaceutical ingredients (APIs) and intermediates which are key ingredients used in making medicines. They supply these to big pharmaceutical companies worldwide. The company focuses on high quality products, has strong research capabilities and operates in both generic and custom made APIs. DivisLab is respected for its global presence and is one of the leading companies in the pharmaceutical sector in India.

Conclusion

Divi's Laboratories has emerged as a strong performer in 2024 with its share price rising over 50% year to date. Despite recent dips in quarterly profits the company shows positive long term potential, driven by new opportunities in GLP-1 APIs and Custom Synthesis. Citi’s high target price of ₹6,400 reflects confidence in Divi’s future growth backed by supply chain diversification. The stock has delivered nearly 59% returns in the last year and continues to gain momentum. However, risks remain if Divi’s fails to expand its Custom Synthesis business with a possible downside of ₹5,100.