Divi’s, one of India’s biggest contract research and manufacturing services (CRAMS) player is often far ahead of its competition. The key differentiator between Divi’s and its peers is the former’s strong relationships with its customers that it boasts of. Not all of that is hot air. The company earns some of the highest margins in its industry (ebitda margin averaged 41.5 per cent in the previous three years). Being the lowest cost producer in some APIs certainly helps as does a dominant global market share in some other APIs (upwards of 50 percent). The company has posted an average ROCE of 36.5 per cent in the last five years. On the flip side, revenues are affected by the rupee movement (the recent rupee decline saw Divi’s come into favour). At a PE of 20 times, Divi’s still trade below its five year median On a PEG basis, this debt free company quotes at an attractive 0.46. Buy.
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