Divis labs results: Misses estimates on high raw material costs

Divis labs results: Misses estimates on high raw material costs

Last updated: 09 Nov, 2021 | 06:10 am

Divis Labs Results: Divis Lab Quarterly Results for Q2 (2021-22) & News

Divi’s labs shares recorded their biggest fall in 20 months after the company missed estimates in the quarter ended September. Many brokerages have either reduced their target price or downgraded their rating on the stocks, as they expect margin pressure because of rising cost of raw materials. Here are the major highlights from Divi’s Labs Q2 earnings and the outlook going forward. 

Profit below estimates - Divi's Lab reported a net profit of Rs 606.5 crore in the quarter ended September. The profit increased 9% sequentially. However, it was below the analyst's expectations. The analysts have earlier estimated a profit of Rs 630.5 crore.

Revenue increase - The revenue increased marginally by 1% QoQ in the September quarter to Rs 1,987.5 crore, lower than analysts' estimates. Analysts have estimated revenue of Rs 2,083.2 crore.

EBITDA and margins - The Earning Before Income, Tax, Depreciation, and Amortization (EBITDA) reduced by 4% and stood at Rs 818.1 crore in Q2FY22 against the forecast of Rs 887.6 crore. Margins were lower by 130 basis points (QoQ) and stood at 41.2% against analyst expectation of 42.6%.

Divi's Labs Q2 highlights:

Forex loss/gain - India’s second-largest drugmaker reported a forex loss of Rs 7 crore, as against a loss of Rs 16 crore during the corresponding quarter of last year.

Divis lab quarterly results: Review

Divi’s Labs has reported a lacklustre set of numbers in the Jul-Sep 21 period, impacted by higher raw material costs. While the gross margin remained flat, the EBITDA margin has declined by 120 basis points (bps) (YoY) to around 41.2%. Higher-than-expected rise in other expenses (up almost 22 percent YoY) hurt at the operating level. Further, employee costs increased by 16 percent on-year.

In the previous quarter, Divi’s Labs had highlighted six growth engines for the future. These included growth in Established Generics (market share >70%), increased capacity utilization of existing generics (share of 20-30%), Sartan APIs, Contrast Media, Custom Synthesis, and New generics. The Company has identified 16 new molecules (large volume but niche molecules) whose patents are set to expire over FY22-26. Divi’s said that the capex is already in place for these growth levers. While these should aid the performance, margin pressures remain a concern.  

Divis laboratories q2 results: Brokerages take

Jefferies - Divi’s Jul-Sep 21 revenue/EBITDA missed Jefferies' estimates by 2%/3% but Profit beat expectations on lower taxes. “The stock trades at an expensive valuation, and we do not see major upside for the stock from here. We downgrade our rating to Hold. Our price target moves from ₹5,624 to ₹5,563,' it said in a note. 

Motilal Oswal - It has given a buy target of Rs 6,050 per share, an upside of 16%. The firm is positive on the stocks because of strong demand in the Custom Synthesis Segment, reduced cost of production due to backward integration, and the Kakinada project being back on track.

Dolat Capital - The firm has given a recommendation of 'accumulate' with a target price of Rs 5,400 per share, an upside of 4%. It believes that end-to-end integration coupled with better process technology are its key success levers.

We are a SEBI registered investement advisor
Mutual Funds watchlist
aditya birla sun life flexi cap fund growth direct plan|ABSL low duration fund direct growth|axis bluechip fund direct growth|axis capital builder fund series 4|axis balanced advantage fund direct growth|axis equity saver fund direct growth|axis multicap fund direct growth|axis global innovation fund of fund direct growth|axis long term equity fund growth NAV|axis quant fund direct growth|axis small cap fund direct growth|axis value fund direct growth|baroda dynamic equity fund direct growth|BOI AXA bluechip fund|canara robeco flexi cap fund direct growth|canara robeco small cap fund direct growth|canara robeco value fund direct growth|DSP quant fund direct|franklin india smaller companies fund direct growth|HDFC arbitrage fund direct growth|HDFC balanced advantage fund direct growth|HDFC developed world index fund NAV|HDFC flexi cap fund direct growth|HDFC housing opportunities fund direct growth|HDFC hybrid equity fund direct growth|HDFC nifty 50 index fund|HDFC index fund sensex plan|HDFC mid cap opportunities direct plan growth|HDFC multi asset fund direct growth|HDFC small cap fund direct growth|HDFC top 100 fund direct growth|HSBC midcap fund direct growth|ICICI prudential balanced advantage fund|ICICI bluechip fund direct growth NAV|ICICI prudential commodities fund direct plan growth|ICICI nasdaq 100 fund direct growth|ICICI nifty next 50 index fund direct growth|ICICI small cap fund direct growth|ICICI prudential technology direct plan growth calculator|ICICI ultra short term fund direct growth|IDBI india top 100 equity fund direct growth|IDBI small cap fund direct growth|idfc us equity fund of fund direct growth|kotak short term fund direct growth|kotak emerging equity fund direct growth|kotak multicap fund direct growth|kotak global innovation fund of fund NAV|kotak gold fund direct growth|kotak savings fund direct growth|kotak small cap fund direct growth|L&T emerging businesses fund direct growth|mirae asset large cap fund direct growth|mirae asset midcap fund|motilal oswal nasdaq 100 fund of fund|navi nifty 50 index fund direct growth|nippon india banking and financial services fund direct growth|nippon banking fund direct|nippon india flexi cap fund NAV|nippon india large cap fund direct growth|nippon india pharma fund direct growth|nippon india small cap fund direct growth|PGIM small cap fund direct growth|quant flexi cap fund direct growth|quant infrastructure fund direct growth|quant tax plan direct plan growth|SBI bluechip fund direct growth|SBI corporate bond fund direct growth|SBI equity minimum variance fund direct growth|SBI flexi cap fund|SBI magnum children's benefit fund investment direct plan|SBI nifty index fund direct growth|SBI small cap fund direct growth|SBI technology opportunities fund direct growth|tata banking and financial services fund direct plan growth|tata business cycle fund|tata technology fund direct growth|tata equity pe fund direct growth|tata ethical fund direct growth NAV|tata focused fund direct growth|tata index fund nifty direct plan|tata india tax savings fund direct plan growth|UTI focused equity fund direct growth|UTI nifty index fund direct growth NAV|UTI nifty 50 index fund direct growth