Divis Labs sheds 14% in two days, hits 52-week low post Q4 results

The company has earmarked an aggressive capex of around Rs 2,000 crore over next two years in order to take a chunk of around $20 billion opportunity of APIs going off-patent over FY23-25.

Shares of Divis Laboratories hit a 52-week low of Rs 3,708, down 4 per cent on the BSE in Tuesday’s trade so far. The stock has slipped 14 per cent in the past two trading days despite the pharmaceutical company delivering a better-than-expected March quarter (Q4FY22) results, with the highest-ever quarterly sales and earnings before interest, taxes, depreciation, and amortization (EBITDA). The board recommended a dividend of Rs 30 per share of face value Rs 2 each i.e., 1500 per cent for the financial year 2021-22.

The stock has fallen below its previous low of Rs 3,790 touched on January 24, 2022.

The company’s consolidated revenues grew 41 per cent year on year (YoY) to Rs 2,518 crore. EBITDA grew 54 per cent YoY to Rs 1,104 crore, while margins improved 380 bps YoY to 43.9 per cent mainly due to lower employee and other expenditure. Net profit grew 78 per cent YoY to Rs 895 crore. The performance was largely led by strong traction in the Custom Synthesis (CS) segment.

Motilal Oswal Financial Services lowered its FY23/FY24 EPS estimate by 11 per ecnt/14 per cent, factoring in reduced sales of COVID-related products, considering the low number of cases globally, a gradual uptick in growth in the Generics segment, and delay in implementation of Kakinada capex.

“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 around Rs 2,000 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,” ICICI Securities said in a note. Divi’s remains a quintessential play on the Indian API/CRAMs segment with its product offerings and execution prowess, the brokerage firm said.