Divi's Labs - Work-In-Progress For A Better Outlook: Motilal Oswal

Motilal Oswal Report

We recently met Divi's Laboratories Ltd. management to understand the business outlook. Below are the key takeaways:

• The cost pressures are easing across major factors, indicating improved profitability going forward.

• The outlook for contrast media segment remains encouraging, given Divi’s capability to have better Iodine recovery and limited investment by formulators to manufacture active pharma ingredient.

• The green-field capital expenditure at Kakinada would not only cater to the company’s growth requirements from FY25 onwards, but also, would reduce the concentration of Divi'sI business at Hyderabad/Vizag.

• While the improvement in outlook is encouraging, the valuations remain high, considering the flat earnings growth in FY24 (43 times FY24E earnings/33 times FY25E earnings).

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