ICICI Direct Bets On MNC Pharma Stock For 16% Upside In 12 Months, PAT Up 26%

Leading brokerage firm ICICI Direct has given buy rating to the stock of Divi's Laboratories for a potential gain of 16%. The market capitalization of the stock is Rs 98,972.00 crore.

Divi's Laboratories Stock Outlook

The current market price of the stock is Rs 3728 apiece with a 52-week high of 5425 apiece and 52-week low of Rs 3365 apiece. According to ICICI Direct, if investors buy the stock now at its current market price, the stock can reach its target price of Rs 4315 apiece in a period of 12 months.  

Multibagger Returns: The stock has given multibagger returns with 5 years return at 494% and 3 years return at 123%.

2. Key Triggers For Future Price Performance

The company has been building capacity in a few more niche APIs as per the evolving demand scenario in the backdrop of 'China plus one' opportunities and upcoming opportunity size of ~US$20 billion in molecules going off-patent over FY23-25. Progress towards six identified growth areas- 1) Established generics, 2) Existing generics, 3) New generics, 4) Sartan APIs, 5) Contrast Media, 6) CS. Commercialisation of new API and multipurpose facility for custom synthesis and progress on 1) new DMF filings & 2) contrast media APIs. There is a progress on Kakinada greenfield project (planned outlay Rs 1000-2000 crore).

3. Divi's Laboratories Valuation

According to ICICI Direct, "Divi's share price grew by approximately 2.3x over past three years. Maintain BUY as the company remains a compelling bet as a structurally well positioned customs synthesis and API company, even after a possible flattish year ahead on a high base in FY22 while some near-term margin pressure is transitory in nature. Valued at Rs 4315 i.e. 38x P/E on FY24E EPS of Rs 113.5."

4. About Divi's Laboratories

Divi's is engaged in manufacturing generic APIs and intermediates, custom synthesis (CS) of active ingredients and advanced intermediates for pharma MNCs, other speciality 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 in generics it enjoys significant market share in products like Naproxen, Dextromethorphan and Gabapentin among others. Divi's is fully backward integrated in products with high market share. The management intends to follow suit in other products.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.