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Divi's Labs just dropped a strong Q4 card. Net profit jumped 26 per cent year-on-year to Rs 667 crore, revenue rose 12 per cent to Rs 2,536 crore, and the stock shot up nearly 6 per cent to hit an all-time high of Rs 6,682 today (May 19).
To sweeten the deal, the company declared a Rs 30 per share dividend.
But before you rush in, know this — the results were good, but the stock? It might already be running a bit too hot.
What's driving the stock?
The key driver this quarter was margin expansion. Gross margins improved to 62.1 per cent, helped by softening input costs and a better product mix. EBITDA rose 21 per cent to Rs 886 crore. The API business, which had been under pressure, showed signs of a comeback.
With the company throwing in a Rs 30 dividend, investor sentiment turned bullish.
Here's what the brokerages are saying:
| Brokerage | Call | Comment |
|---|---|---|
| Nuvama | Buy | Target Rs 7,225. Likes the long-term prospects. |
| Motilal Oswal | Neutral | Target Rs 6,540. Thinks the stock is fairly valued. |
| Systematix | Sell | Sees valuation as stretched vs global peers. |
Global competitors like Lonza and Wuxi AppTec trade at lower multiples. That's the red flag some analysts are waving.
What Divi's does
Divi's Laboratories is one of India's heavyweight pharma exporters. It makes active pharmaceutical ingredients (APIs) and intermediates — the core stuff that goes into drugs. It supplies to global markets and serves major innovators in the pharma world. Over the years, Divi's has built a reputation for quality, reliability, and scale.
Below are the company's fundamental metrics:
| Metric | Value |
|---|---|
| Market cap | Rs 1,71,571 cr |
| Revenue (TTM) | Rs 9,360 cr |
| Net profit (TTM) | Rs 2,191 cr |
| ROE | 12.1 per cent |
| ROCE | 16.5 per cent |
| P/E ratio | 78.3 |
| P/B ratio | 11.5 |
| Industry P/E | 51.38 |
| EV/EBITDA | 50.6 |
| Dividend yield | 0.5 per cent |
| Debt to equity | 0 |
| EPS (TTM) | Rs 82.5 |
Value Research Online rating
-
Overall rating
: 4/5
-
Quality
: 8/10
-
Growth
: 6/10
-
Valuation
: 2/10
- Momentum : 9/10
In short, the stock is loved for quality and price momentum, but not for its valuation.
Final word
Divi's has a clean balance sheet, global presence, and solid execution. But the price has already baked in a lot of optimism. If you're a long-term investor, it might still be worth nibbling on dips.
But if you're looking for fresh value buys, this may not be the best entry point. The rally might have outrun the fundamentals, for now.
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Disclaimer: This is not a recommendation. This story was created with the assistance of artificial intelligence and is intended for informational purposes only. Please take it with a pinch of salt and do your own research or consult a financial advisor before making investment decisions.
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