MOSL: DIVI'S LABORATORIES (Neutral)-Strong revenue growth, better operating leverage drives earnings
Divi's Laboratories: Strong revenue growth, better operating leverage drives earnings
(DIVI IN, Mkt Cap USD5.7b, CMP INR1530, TP INR1570, 1% Upside, Neutral)
- DIVI’s reported strong revenue growth of ~29% YoY to INR13.4b v/s our est. of INR12.2b, partly due to low base of last year. Gross margin expanded ~360bp YoY (+110bp QoQ) to 64.2%.
- EBITDA margin improved significantly by ~600bp YoY to 39% due to improvement in gross margin and better operating leverage. Employee cost increased at a lower rate of 19% YoY to INR1.4b, and other expenses remained stable at INR1.6b. Revenue growth coupled with margin expansion led to ~53% YoY growth in EBITDA to INR5.2b v/s our est. of INR4.8b. PAT stood at INR3.8b, which included forex loss of INR411m. Excluding this, PAT grew ~73% YoY to INR4.1b v/s our est. of INR3.4b.
- For 9MFY19, sales stood at INR36.2b (+32% YoY), EBITDA at INR13.9b (+61% YoY) and Adj. PAT at INR10.2b (+64% YoY).
Other highlights:
- Generic sales came in at 53% with CRAMS at 47%.
- Nutraceuticals sales grew 24% YoY to INR870m for the quarter, largely due to robust off-take of volume by customers.
- Due to increased visibility for orders from innovators and the generic business, DIVI’s is on track to spend ~INR12b (~INR6b in SEZ Unit-1 and INR6b at SEZ Unit-2) over the next 2-3 years.
- The green-field project at Kakinada is facing land acquisition issues.
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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