Buy This Bluechip Leading API Manufacturing Stock With Rs. 4,110 Target Price: Top Brokerage

Stock To Buy: Target Price

The Current Market Price (CMP) of Divi's Laboratories Ltd. is Rs. 3,721. Ashika has estimated a Target Price for the stock at Rs. 4,110. This stock has the potential to give a 10.45% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 98,936 crore.

Expected Growth in Global API Market

Expected Growth in Global API Market over 2022-2030 Bodes well Global medicine market is expected to clock 3-6% CAGR over 2022-2030, largely led by emerging markets, which would resultantly drive growth in the API market. The global API market is expected to clock 6% CAGR over 2022-2030 with revenue expected to touch US$353bn, led by the rising prevalence of chronic diseases as well as advancements in API manufacturing. Divi's is expected to clock double-digit growth in established generics products where it enjoys market share in the excess of 60-70%.

Capacity Expansion to Drive Growth

Divi's has capitalized assets worth Rs. 935 crore in FY22 and a further Rs. 87 crore in 1QFY23. As the company is operating at 80-85% of capacity, it has a large available capacity for incremental demand. Divi's has implemented various capacity expansion programs at its existing facilities apart from plant up-gradation and improving the infrastructure. The company plans to spend Rs. 2,000-3,000 crore in the next 2-3 years primarily towards building Greenfield facilities at Kakinada and Krishnapatnam port. The capex towards Kakinada is particularly of major importance to take benefit of the ~US$20bn opportunity of APIs, which are supposed to go off-patent over FY23-25.

Stock Valuation

Divi's is the leading manufacturer of APIs, Intermediates, CS of active ingredients and advanced intermediates for pharma MNCs, other specialty chemicals like Carotenoids and complex compounds like peptides and Nucleotide revenues. In CS, the company maintains a strong relationship with global big pharma players, while it enjoys a significant market share in generics. The Generic: CSM revenue-mix stood at 47%:53% and 47%:53% in FY22 and 1QFY23, respectively. Divi's has identified six areas of growth, like established generics, existing generics, new generics, Sartan APIs, Contrast Media, and CS.

Financial performance

The company's revenue in FY22 was recorded at Rs. 8,799 crore, which is expected to be at Rs. 8,966 crore in FY23. Their EBITDA in FY22 stood at Rs. 3,884 crore, which is expected to be at Rs. 3,497 crore in FY23. The company's net profit in FY22 was recorded at Rs. 2,962 crore, which is expected to be at Rs. 2,567 crore in FY23.

Company Portfolio

Divi's Laboratories Ltd. (Divi's) is the leading manufacturer of Active Pharmaceuticals Ingredients (APIs), Intermediates, Custom Synthesis (CS) of active ingredients for pharma MNCs, other specialty chemicals like Carotenoids and complex compounds. In CS, Divi's maintains a strong relationship with global big pharma players, while in generics it enjoys significant market share. The company has two manufacturing units and is among the top pharmaceutical companies in India.

Disclaimer

The above stock was picked from the brokerage report of Ashika. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.