Divi’s Labs Q2FY25 Results: Net Profit Surges 46% to Rs 510 Crore

Divi’s Laboratories, a leading Indian pharmaceutical company, reported its financial results for the second quarter of fiscal year 2024-25 (Q2FY25), reflecting strong performance across key business segments, with notable increases in profit, revenue, and EBITDA.

Divi’s Labs Q2FY25 Results

• Net Profit: Divi’s Labs reported a net profit of Rs 510 crore, marking a 46.5% increase compared to Rs 348 crore in the same quarter last year (Q2FY24).
• Revenue: Total revenue rose by 22% year-on-year, reaching Rs 2,338 crore.
• EBITDA: The company’s EBITDA jumped nearly 50% to Rs 716 crore, contributing to an improved margin profile for the quarter.

Brokerages’ Expectations and Performance

Analysts anticipated strong results for Divi’s Labs, driven primarily by the Active Pharmaceutical Ingredients (API) and Custom Synthesis Manufacturing (CSM) segments. Here’s how the actual performance aligned with expectations from key brokerage firms:

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1. Kotak Institutional Equities (KIE) Analysis

• Generic API Growth: KIE analysts predicted 9% year-on-year growth in the generic API segment and a 52% increase in the CSM segment, driven by the commercial success of major projects.
• EBITDA Growth: EBITDA was expected to grow by 57% year-on-year, reaching Rs 750 crore, with an expanded margin of 31.6%, supported by strong project execution and efficiency gains.
• Revenue Growth: Overall, revenue was forecasted to increase by 15.2% year-on-year, aligning closely with the reported growth.

2. Nuvama Institutional Equities

• Sacubitril/Valsartan Performance: Analysts at Nuvama highlighted Sacubitril/Valsartan as a key revenue driver, expecting a 17% year-on-year revenue growth. EBITDA was projected to rise by 40% with margins reaching 30.1%.
• PAT Growth: The expected profit after tax (PAT) growth was 33% year-on-year, boosted by improved product mix and operational efficiencies.

3. PhillipCapital Insights

• Trade Challenges: Despite robust year-on-year growth in custom synthesis (20%), PhillipCapital noted that generic export challenges led to slower growth. Sequential growth was impacted by supply chain disruptions.
• Margins and EBITDA: With a more favorable product mix and reduced input costs, EBITDA margins expanded by 310 basis points year-on-year, resulting in a 14% increase in EBITDA.
• PAT: PAT was forecasted to grow by 13% year-on-year, though a decline of 11% quarter-on-quarter was expected due to temporary trade challenges.

4. BNP Paribas Perspective

• Custom Synthesis Segment: BNP Paribas analysts emphasized the contribution of new custom synthesis projects to the company’s revenue growth, anticipating a 25% year-on-year increase in sales.
• Generics and Nutraceuticals: While generics performance remained steady, the nutraceuticals segment was expected to decline by 4% year-on-year.
• Margin Volatility: BNP Paribas projected some volatility in margins due to fluctuating input costs, though year-on-year margin improvements were expected.

Segment-wise Performance Analysis

1. API and Custom Synthesis Manufacturing (CSM): The CSM segment experienced robust growth, contributing significantly to revenue and profit. Analysts noted that the growth was fueled by increased demand and successful project commercialization.
2. Nutraceuticals Segment: This segment saw a slight decline, with a 4% year-on-year decrease due to competitive pressures and changes in product demand.
3. Generics Segment: Moderation in the generics segment was offset by strong custom synthesis sales, which boosted overall revenue.

Outlook for Divi’s Labs

Looking ahead, Divi’s Labs is positioned for sustained growth, particularly in its API and custom synthesis segments. The success of recently commercialized projects and the expansion in EBITDA margins suggest that Divi’s Labs is well-equipped to handle demand fluctuations. However, challenges in the generics and nutraceuticals segments may continue to impact growth in the near term.

Conclusion

Divi’s Labs has demonstrated a resilient growth trajectory in Q2FY25, supported by strong API and custom synthesis sales and improved margins. The company’s ability to adapt its product mix and manage costs has proven crucial in navigating supply chain challenges and market fluctuations