MOSL: DIVI'S LABORATORIES (Neutral)-Regulatory issues impacted revenues
​Divi's Laboratories: Regulatory issues impacted revenues
(DIVI IN, Mkt Cap USD3.0b, CMP INR721, TP INR680, 6% Downside, Neutral)
- Revenues declined 18%YoY (~16% miss), while EBITDA of INR2.4b was 23% below our estimate. EBITDA margin contracted ~1010bpYoY to 29.8% due lower turnover and remediation expense related to import alert at unit II. PAT of INR1.8b (-42%YoY) was ~25% below our estimate. Sales was impacted by INR1.5b during the quarter due to time required for setting up protocols and procedures for release of export shipment as specified in the import alert by the US FDA.
- Guides for minimal impact from Unit-2 import alert: DIVIS expects loss of <5% of sales due to the Unit-2 import alert. Divis has already hired a third-party consultant to enact remediation measures and help the company to prepare for Unit-1 inspection. We have witnessed with DRRD and SUNP that batch-by-batch testing of products leads to a delay in supplies and an increase in cost.
- Unit-1 US FDA inspection is due: Unit-1 accounts for 35% of total revenue &its exposure to the US market stands at ~11% of total revenues. This plant was last inspected in June 14, and an inspection is due over the coming few days. It will be critical for the company to come out clear in the USFDA inspection (particularly since the FDA had cited data integrity issues in Unit-2).
Divi's Laboratories is a manufacturer of Active Pharmaceutical Ingredients and Intermediates. The major portion of its turnover is on account of export of its products to European and American countries. Co.'s product portfolio comprises two segments i) Generic APIs (active pharma ingredients) and Nutraceuticals and ii) Custom Synthesis of APIs, intermediates and specialty ingredients for innovator pharma giants. Co. has two Subsidiaries viz., Divis Laboratories (USA) Inc., and Divis Laboratories Europe AG looking after manufacturing and marketing of Neutraceutical products in North American and European Countries.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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