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Home / Markets / Stock Markets9 to 3,721: Debt-free pharma stock turns 1 lakh to 4.13 Cr in 19 years
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Divi's Laboratories Ltd is a large cap company in the pharmaceuticals industry with a market valuation of 98,972.00 Crore. Leading Active Pharmaceutical Ingredients (API) producer Divi's exports top-notch products to over 95 nations. Divi's has also achieved the feat of being among the top three API producers worldwide and among the top API companies in Hyderabad. According to statistics on Value Research, Divi's Laboratories is currently debt-free, which may be of interest to investors. However, what makes Divi's Laboratories more intriguing is that it is a stark example of a stock that has made investors crorepati over the past 19 years.

Divi's Laboratories Share Price History

Divi's Laboratories Ltd shares ended trading on Friday at 3,721.10 a share, down 5.75% from the previous close of 3,948.05. The stock price rose from 9 on March 13, 2003, to the level it is at now, representing a multibagger return and an all-time high of 41,245.56%. If an individual had invested 1 lakh in Divi's Laboratories shares 19 years ago, it would currently be worth around 4.13 crore. The stock price has gone up from 635.20 as of August 18, 2017, to the current price level during the past five years, representing a multibagger return of 485.82%. 

However, in the last 1 year, the stock has fallen 24.04% and on a YTD basis, the stock has fallen 20.00% so far in 2022. On the NSE, the stock had touched a 52-week-high of 5,425.10 on 18-October-2021 and a 52-week-low of 3,365.55 on 26-May-2022 which means that at the current price level of 3,721.10 the stock is trading 31.40% below the 52-week-high and 10.56% above the 52-week-low.

Divi's Laboratories Q1FY23 results

Divi's Laboratories has earned a total income of 2343 crores in Q1FY23 on a consolidated basis as against 1997 crores for the corresponding quarter of last year, a YoY rise of 17.32%. On a consolidated basis, the company reported a Profit before Tax (PBT) of 851 crores as against a PBT of 814 crores for the corresponding quarter of the last year, a YoY growth of 4.54%. The company earned a Profit after Tax (PAT) of 702 crores on a consolidated basis for the current quarter as against a PAT of 557 crores for the corresponding quarter of the last year, a YoY growth of 26.03%. 

On a consolidated basis, forex gain for the current quarter amounted to 56 crores as against a gain of 20 crores in Q1FY22. Furthermore, the company's total revenue increased by 15.50% YoY to 2294 Cr in Q1FY23 from 1986 Cr in Q1FY22 on a standalone basis. The firm recorded a PBT of 844 Cr on a standalone basis, up from 814 Cr in Q1FY22, representing a YoY rise of 3.68%. The firm recorded a PAT of 692 Cr on a standalone basis, up from 552 Cr in Q1FY22, representing a YoY rise of 25.36%.

Should you buy the shares of Divi's Laboratories?

The research analysts of the broking firm Sharekhan have said in a note that “Divis Laboratories’ (Divis) Q1FY23 results were a mixed bag and reflected the higher operating costs while lower tax rate resulted in a double-digit PAT growth. The revenue grew strongly in double digits backed by benefits from expanded capacities, the PAT due to lower tax rate too grew in double digits. The results missed estimates. The management commentary pointed at healthy demand, well supported by capacity expansion plans, which would drive top line growth for the company, however the management expects elevated cost pressures to sustain going ahead as overall costs including raw material, freight costs and power costs are at higher levels. This could weigh on performance in the subsequent quarters. Though Divis has implemented cost-control measures in the form of backward integration and de-bottlenecking of existing facilities and these could play out over the medium to long term."

“Divis’ growth prospects across its business stay bright and will propel growth over the long term. Established capabilities, backward integration, focus on quality, and benefits of scale coupled with major capacity expansion plans commencing, are the positives that could support growth. However, given the cost headwinds including higher raw material costs, freight costs, and power costs, could overweigh on the performance in the near term. At CMP, the stock trades at valuations of 36.7x/31.9x its FY23E/FY24E EPS, respectively, while there are apparent near-term concerns, long-term growth levers are intact, hence we maintain a Buy recommendation on the stock with a revised PT of 4450," said the research analysts of the broking firm Sharekhan.

The research analysts of the broking firm ICICI Securities said “Divi’s share price grew by ~2.3x over past three years. Maintain BUY as the company remains a compelling bet as a structurally well positioned customs synthesis and API company, even after a possible flattish year ahead on a high base in FY22 while some near term margin pressure is transitory in nature. Valued at 4315 i.e. 38x P/E on FY24E EPS of 113.5."

The company has been building capacity in a few more niche APIs as per the evolving demand scenario in the backdrop of ‘China plus one’ opportunities and upcoming opportunity size of ~US$20 billion in molecules going off-patent over FY23-25, progress towards six identified growth areas- 1) Established generics, 2) Existing generics, 3) New generics, 4) Sartan APIs, 5) Contrast Media, 6) CS, commercialisation of new API and multipurpose facility for custom synthesis and progress on 1) new DMF filings & 2) contrast media APIs and progress on Kakinada greenfield project (planned outlay 1000-2000 crore) are the key triggers for the future price performance of Divi's Laboratories as per the research analysts of the broking firm ICICI Securities.

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

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