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Pharmaceuticals company Divis Laboratories on Friday reported a 26% rise in its consolidated net profit at 702 crore as compared to 557 crore in the same quarter last year. Meanwhile, its revenue from operations rose about 15% to 2,254 crore from 1,960.6 crore year-on-year (YoY).

“DIVI delivered an in-line earnings in 1QFY23. While traction in Custom Synthesis (CS) has toned down in 1QFY23, there has been a pick-up in the sale of Nutraceuticals. Also, the completion of additional capacity will drive a better sales run-rate in the Generics segment," said brokerage and research firm Motilal Oswal while maintaining buy rating on Divis Labs shares with a target price of 4,340 apiece.

The management reiterated its EBITDA margin guidance of 40%, including other income, for FY23. With capacity expansion in the Generics segment in place, it expects sales to pick up going forward. DIVI is working towards peptide chemistry and HiPo conjugate drug-related technology, which will drive opportunities over the next three-to-four years, as per the brokerage.

"While the high base in FY22 may cap earnings growth in the near term, DIVI continues to strengthen its skill sets in newer technology like peptides, HiPo conjugate drugs, and contrast media products. It is also building up its commercial capability to tap future business opportunities. We maintain our Buy rating," the note stated.

Since its listing in March 2003, the multibagger stock has rallied more than 41245% in 19 years, however, the pharma stock is down about 20% in 2022 (YTD) so far, trading about 31% down from its highs. 

Divi's Laboratories Ltd is an of Active Pharmaceutical Ingredients (APIs) and Intermediates manufacture and is engaged in manufacture of leading generic compounds Nutraceutical ingredients and custom synthesis of APIs and intermediates for global innovator companies.

“We cut our FY23/FY24 EPS estimate by 6%/3% to factor in: a) a higher operating cost due to an inflation-linked increase in raw material cost and elevated freight cost, and b) some moderation in the CS segment," Motilal Oswal added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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