Motilal Oswal has given Buy recommendation for Divi’s Laboratories recommended buy rating on the stock with a target price of Rs 4340 in its research r with a target price of Rs. 4340 in its research report issued on Aug 13, 2022

Motilal Oswal’s research report on Divi’s Laboratories

DIVI delivered an in-line earnings in 1QFY23. While traction in Custom Synthesis (CS) has toned down in 1QFY23, there has been a pick-up in the sale of Nutraceuticals. Also, the completion of additional capacity will drive a better sales run-rate in the Generics segment. We cut our FY23/FY24 EPS estimate by 6%/3% to factor in: a) a higher operating cost due to an inflation-linked increase in raw material cost and elevated freight cost, and b) some moderation in the CS segment. We continue to value DIVI at 33x 12M forward earnings to arrive at our TP of INR4,340. While the high base in FY22 may cap earnings growth in the near term, DIVI continues to strengthen its skill sets in newer technology like peptides, HiPo conjugate drugs, and contrast media products. It is also building up its commercial capability to tap future business opportunities. We maintain our Buy rating.

Outlook

We continue to value DIVI at 33x 12M forward earnings to arrive at price target of INR4,340

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