Divis reported muted set of numbers which missed except Generics and gross profit marginsDIVISLAB - 3734 Change: -6.70 (-0.18 %)
Revenues de-grew 6.7% YoY to Rs 1855 crore (I-direct estimate Rs 2074 crore)
· Generics business increased 34% YoY to Rs 895 Crore (I-direct estimate Rs 901 crore)
· Nutraceuticals decreased 3% YoY at Rs163 Crore (I-direct estimate – Rs 193 crore)
· Custom synthesis decreased 31% YoY to Rs 797 Crore (I-direct estimate- Rs 979 crore). Significant deviation from our estimates was attributable to significantly lower molnupiravir (Covid drug) execution
· Gross Margins decreased by ~343 bps over previous year to 63.6% (I-direct estimate 64%)
· EBITDA margins decreased 767 bps YoY to 33.5% (I-direct estimate 38.2 %), due to high energy and transport costs.
· Adjusted PAT decreased 18.6% YoY to Rs 494 crore (I-direct estimate 558 crore)
Q2 numbers were affected due to slowdown in custom synthesis segment as the company has started perusing non-Covid related opportunities especially at phase 2, phase 3 stages. Although management remains optimistic about the opportunities, the full impact of that potential might take 4-6 quarters. On the generics front the management is looking at opportunities from patent expiries between 2023-25 (~US$ 20 billion addressable market). Overall, we expect the performance in custom synthesis to weigh on sentiments for the next few quarters.