Divi’s Labs Q1 Results: Profit Beats Estimates, But Margin Narrows
Divi’s Laboratories’ net profit jumped 26% year-on-year, the management guided for 40%+ ebidta margins.
Divi’s Laboratories Ltd.’s first-quarter profit rose, beating estimates, but margin narrowed.
Net profit of India’s second-largest drugmaker by market value jumped 26% year-on-year to Rs 702 crore in the three months through June, according to its exchange filing. That compares with the Rs 660-crore consensus estimate of analysts tracked by Bloomberg.
Key Highlights (YoY)
Revenue up 15% at Rs 2,255 crore (Estimate: Rs 2,228 crore)
Operating profit down 1% at Rs 847 crore (Estimate: Rs 922 crore)
Operating margin at 37.6% vs 43.5% (Estimate: 41.4%)
Earnings Call Highlights
While demand has stabilised, cost pressures and logistical pressures continue to persist leading to pricing pressures.
Its overall exports for the year stood at around 90%, of which 74% was to the regulated markets of the U.S. and Europe.
Prices of raw materials specially solvents have gone up. While some costs have been contained partially because of long-term contracts and backward integration, "solvents prices gone up by 30-50% and in some cases as high as 100%."
Even energy prices have gone up, they said. Coal price increased from Rs 6 per kg to Rs 8 per kg and the cost of power generation has gone up from Rs 30-40 per unit to Rs 60-80 per unit, the company said.
They launches three new active pharmaceutical ingredients in the quarter across multiple countries. Of this one is a contrast media API.
Murali Divi, managing director, said, "Contrast media could be a big growth driver for the next two years."
Newer generics, the management said, will occupy less capacity and will have higher margins, medium volume and higher value. Since the current capacity utilisation is at 83%, it has sufficient capacity to take on newer projects. It has planned a capex of Rs 500-600 crore towards newer technologies at existing facilities. The new custom synthesis facility is also ready now.
Of the quarterly revenue, 53% is from custom synthesis while the remaining 47% comes from generics. They wish to maintain this ratio at 50-50%, going forward.
The management has guided for "Ebitda margin of above 40%, including other income."
They are still awaiting approvals for Kakinada plant and the company has a cash balance of Rs 3,431 crore as on June 30.
Shares of Divi’s Labs closed 5.56% lower on Aug. 12, after the quarterly results and the earnings call, compared with a 0.22% rise in the benchmark S&P BSE Sensex.