Divi's Laboratories (DIVISLAB)
Why the stock moved
Record quarterly performance with EBITDA margin of 38%, driven by high-margin API exports and new custom synthesis contracts.
In-depth analysis
Divi's Lab reported exceptional quarterly results with revenue of ₹2,350 crores (up 18% YoY) and EBITDA margin of 38%, highest in recent times. The company's focus on complex chemistry and custom synthesis is yielding superior profitability. Secured three new long-term contracts with innovator companies for specialized APIs.
Key highlights
- Margin Expansion: EBITDA margin at 38%, up 250 bps YoY
- New Contracts: 3 long-term custom synthesis deals worth $150 million
- Capacity Addition: Unit III expansion completed, adding 30% capacity
- R&D Pipeline: 15 new molecules under development
- Cash Generation: Free cash flow of ₹1,800 crores in 9 months
Outlook
Company guides for 15-18% revenue CAGR over next 3 years driven by custom synthesis and complex APIs. Unit III ramp-up expected to contribute significantly from H2 FY25. Focus on high-barrier, niche molecules to maintain premium margins. Minimal capex planned for next 2 years.
Risk factors
Customer concentration risk with top 5 clients contributing 65% of revenue. Potential disruption from Chinese competition in certain APIs. Regulatory compliance costs increasing. Currency fluctuations impact USD revenues.