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Divi's custom synthesis drives revenues amid sustainable margins
What’s Buzzing:
Divi's Laboratories quarterly performance was a significant beat vis-à-vis I-direct and consensus estimates amid near normal operations.
Context:
Revenues grew 46.5% YoY to Rs 2493.2 crore (I-direct estimate: Rs 2019.7 crore). Revenue mix for this quarter was ~ 60:40 for custom synthesis and generics. EBITDA margins improved 338 bps YoY to 44% (I-direct estimates of 40.5%) mainly due to lower employee and other expenditure offsetting the lower gross margins (down 240 bps YoY to 66.6%). Subsequently, EBITDA grew 58.7% YoY to Rs 1097.2 crore (I-direct estimate: Rs 817.6 crore).
Our perspective:
More than a strong quarterly performance, the important narrative for Divi’s is its unprecedented capex plans to further augment capacities besides preparing for growing opportunities arising due to China plus one factor. It has earmarked an aggressive capex of ~Rs 1000–2000 crore (including greenfield Kakinada plant) over next two years in order to take a chunk of ~US$20 billion opportunity of APIs going off-patent over FY23-25. Divi’s remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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