'Buy' This Pharma Stock For 17% Returns: ICICI Direct

Brokerage firm ICICI Direct has recommended investors to buy stocks of Divi's Laboratories with a potential upside of 17%, within a target period of 1 year.

Target Price

The Current Market Price (CMP) of Divi's Laboratories is Rs. 4716 The brokerage firm, ICICI Direct has estimated a Target Price for the stock at Rs. 5600. Hence the stock is expected to give a 17% return, in a Target Period of 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 4716
Target Price	Rs. 5600
1 year returns	17.00%

Company performance

The pharma sector overall has performed quite well during the pandemic. The brokerage firms stated that Divi's Laboratories had lower than estimated results in Q2FY22 as higher CS nullified by muted generics. The company's sales were up 13.6% YoY to Rs. 1987.5 crore, while EBITDA in Q2FY22 was at Rs. 818 crore, up 10% YoY with margins at 41%. Consequent adjusted PAT was at Rs. 606.5 crore (up 16.7% YoY). ICICI Direct commented, "The company has been building capacities in a few more niche APIs as per the evolving demand scenario in the backdrop of 'China plus one' opportunities."

Comments by ICICI Direct

According to ICICI Direct, "Divi's share price has grown by ~3.9x over the past five years (from ~Rs. 1198 in June 2016 to ~Rs. 4716 levels in November 2021). Maintain BUY on the back of strong outlook both in CS and generics based on significantly high visibility CAPEX and customer stickiness."

About the company

Divi's is engaged in manufacturing generic APIs and intermediates, custom synthesis (CS) of active ingredients and advanced intermediates for pharma MNCs, other specialty chemicals like Carotenoids, and complex compounds like peptides and Nucleotide revenues. The company is progressing on the Kakinada greenfield project (planned outlay Rs. 1000-2000 crore).

Disclaimer

The above stock was picked from the brokerage report of ICICI Direct. 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.

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