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Divi's Labs: Steady quarter driven by growth in custom synthesis

News: Q2 revenues grew 13.6% YoY to Rs.1987.5 crore (I-direct estimate: Rs.2116.7 crore). EBITDA margins declined 121 bps YoY to 41.2% (I-direct estimates of 41%) mainly due to higher other expenditure. Subsequently, EBITDA grew 10.4% YoY to Rs.818.1 crore (I-direct estimate: Rs.867.8 crore). PAT grew 16.7% YoY to Rs.606.5 crore (I-direct estimate: Rs.641.5 crore) in line with a strong operational performance.

Views: Divi’s Laboratories reported a steady Q2FY22 performance. Q2 topline and PAT were slightly below I-direct estimates. More than 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.3700 crore [Rs.1800 (existing plans) + Rs.400 (custom synthesis blocks) + Rs.1500 (greenfield Kakinada plant) crore], over and above ~Rs.2000 crore spent in the last five years. Divi’s remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess.