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📊 Divi’s Laboratories Ltd: Long-Term Investor Report

Lesson 154/225 | Study Time: 15 Min

Course: Top Quality Companies

📊 Divi’s Laboratories Ltd: Long-Term Investor Report

🏢 Company Overview

Divi’s Laboratories Ltd (Divis Lab) is among India’s largest Active Pharmaceutical Ingredient (API) and Custom Synthesis manufacturers, catering to both global innovators and generic players. Founded in 1990, Divis has built strong capabilities in:

Generic APIs (including anti-inflammatory, cardiovascular, anti-epileptic)
Custom Synthesis for global pharma majors
Nutraceuticals (carotenoids, vitamins)

The company is known for its cost leadership, regulatory compliance (USFDA, EU, Japan), and long-standing customer relationships with Big Pharma.

🌍 Industry Outlook

The global API market is projected to grow at 6–7% CAGR till 2030, driven by:

Rising demand for generic drugs post patent expiries.
China+1 strategy, benefiting Indian API players.
Demand for custom synthesis & CDMO partnerships.
Increasing share of nutraceuticals in wellness markets.

India, already the 3rd largest pharma market by volume, is positioned as a reliable global supplier. Divi’s, with its strong balance sheet and execution record, is expected to remain a key beneficiary.

📈 Financial Performance (2 Decades Journey)

Year	Sales (₹ Cr)	Profit (₹ Cr)	Margin
FY2001	188	26	14%
FY2010	947	344	36%
FY2015	3,127	847	27%
FY2020	5,395	1,377	26%
FY2022	8,960	2,960	33%
FY2025	9,360	2,191	23%
Trail FY25	9,652	2,306	24%

Highlights:

20-year Sales CAGR: ~18%, Profit CAGR: ~19%
Margins historically range between 20–35%, showing high operating efficiency.
FY22 peak margins (33%) were aided by Covid-related demand, normalizing to 22–24% now.

📊 Q1 FY26 Performance

Sales: ₹2,410 Cr (+14% YoY)
Profit: ₹545 Cr (+27% YoY)
EBITDA: ₹733 Cr (+21% YoY)
EBITDA Margin: 22.6% (vs 20% LY)
EPS: ₹20.5 (+26% YoY)
ICR: 617x (very strong balance sheet, negligible debt)

🔹 Growth driven by generic APIs and CDMO contracts.
🔹 Strong margin expansion due to operational efficiency and lower raw material cost impact.

🏭 Cost Structure (Q1 FY26)

Material Cost: ₹1,010 Cr (56%, +13% YoY)
Employee Cost: ₹340 Cr (19%, +16% YoY)
Depreciation: ₹112 Cr (+15% YoY)
Other Expenses: ₹385 Cr (+10% YoY)

⚡ Divi’s remains cost-efficient with high EBITDA margins >22%, a rarity in Indian pharma.

🔎 Valuation History (PE & PBV Trends)

PE Range (10Y): 24x – 76x
PBV Range (10Y): 5x – 11x

Historically, Divi’s trades at a premium to pharma peers (Sun, Dr. Reddy’s, Cipla) due to its:
✅ High margins
✅ Strong cash flows
✅ Debt-free balance sheet

📊 Future Estimates

Year	Sales (₹ Cr)	Profit (₹ Cr)	EPS	BV	Fair Value (Blended)
FY26E	10,858	2,454	92	630	₹4,246
FY30E	18,990	4,828	182	991	₹7,609
FY35E	33,467	8,508	321	1,746	₹13,410

⚡ Long-term revenue CAGR expected ~15%, profit CAGR ~15%.
⚡ Potential to 3x from FY26 to FY35 on conservative assumptions.

📊 Peer Comparison

Company	Sales FY25 (₹ Cr)	Profit FY25 (₹ Cr)	Margin	PE (TTM)	PBV
Divi’s	9,360	2,191	23%	57–79	9–12
Sun Pharma	48,000	8,700	18%	33–40	5–6
Dr. Reddy’s	26,000	5,300	20%	25–30	4–5
Cipla	26,000	4,400	17%	30–35	5–6