Brokerage firm, Motilal Oswal is bullish on the stock of Divi's Labs, following a record performance, led by robust demand and strong execution.
"Divi's Lab (DIVI) delivered all-time high sales/EBITDA/PAT for the quarter. Overall performance was led by volumes and did not include any business opportunity related to COVID-19 treatment.
The major capex program would be completed in FY21, and the commercial benefit would start accruing in FY22. This would further enhance the earnings trajectory going forward," Motilal Oswal Institutional Equities has said in its latest report.
"We raise our EPS estimate by 16%/13% for FY21/FY22E to factor favorable demand for DIVI's APIs, margin enhancement owing to an increase in the in-house manufacturing of intermediates, and additional revenue from new capex.
"We expect a 33 per cent earnings CAGR over FY20-22E, led by increased business prospects from Custom Synthesis and Generics as well as 600 basis points margin expansion on better operating leverage.
We value DIVI at 35 times 12 month forward earnings to arrive at a target price of Rs 3,350. We upgrade to BUY, on account of promising demand prospects and multiple levers in place for DIVI (chemistry skill sets, efficient manufacturing capability, and considerable scale of operations to gain market share in focus products)," the brokerage firm has stated.