Divi’s Laboratories shares rally 5% post Q4 results. Should you buy, sell or hold?

Shares of Divi’s Laboratories zoomed 5% on BSE in Monday's trade to hit its fresh 52-week high of Rs 4,335 as brokerages like Motilal Oswal and InCred are bullish on the stock after the company posted a 68% year-on-year (YoY) increase in its Q4 profits at Rs 538 crore.

The consolidated revenue in the reported quarter stood at Rs 2,303 crore which was up from Rs 1,951 crore reported in a year-ago period, registering 18% growth while also announcing a dividend of Rs 30 per share for FY24.

Here is how brokerages viewed the results:

InCred Equities

Divi’s Lab surpassed InCred’s Q4 expectations. There was a substantial rise in enquiries in CCS business and visibility for the same seems to be improving. InCred has hiked FY25F/FY26F EPS by 12%/13%.

InCred has upgraded the rating from ‘reduce’ to ‘add’ and raised the target price to Rs 4,707.

Prabhudas Lilladher

Our FY25E/FY26E EPS estimates increased by 10%. Divi’s Laboratories Q4FY24 EBITDA was 18% above our estimate led by higher custom synthesis revenues (up 47% YoY) and better operating leverage. GMs have largely stabilized over the last few quarters and likely to improve led by better product mix and stable raw material prices.Prabhudas Lilladher expects 26% EBITDA CAGR and 27% PAT CAGR over FY24-26E.

Prabhudas Lilladher has an ‘accumulate’ rating for the stock with a target price of Rs 4,350.

Motilal Oswal

Divi’s Labs has been making great strides in both the CS and API segments through a strong chemistry skill set.

“It is not only getting ready to supply APIs once they are off-patent, but also working on backward integration to gain market share/maintain profitability in the existing API portfolio. DIVI continues to improve services under the CDMO segment during product development and manufacturing stages. We expect a 27% earnings CAGR over FY24-26,” said a report by Motilal Oswal.

The domestic brokerage firm has reiterated its ‘neutral’ rating on the stock with an increased target price of Rs 3,900.

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Nuvama

Divi’s beat consensus Q4FY24 numbers handsomely with the improved traction in the custom synthesis (CS) business, which led to better product mix and an overall EBITDA margin of 31.7%.

“We forecast a revenue/EBITDA/PAT CAGR of 16%/26%/27% over FY24–26E, and are building in FY25E/26E EBITDA margin of 31%/33%,” said Nuvama.

Nuvama has retained a ‘reduce’ rating on the stock while revising the target price to Rs 3,660.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)