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    Divi's Lab.

    DIVISLABGood
    Healthcare·3 Feb 2025
    Management Summary

    Divi's delivered a strong Q3 with 25% revenue growth and 64% PAT growth driven by custom synthesis momentum (53% of Q3 revenue). EBITDA margins expanded to ~32% on favorable product mix and operating leverage. Kakinada Phase 1 commenced in January 2025 for backward integration and starting materials. Management actively engaging with innovators on GLP-1 building blocks, fragments and peptide synthesis using both SPPS and LPPS capabilities.

    Highlights

    8
    • Q3 FY25 total income at ₹2,401 crores vs ₹1,915 crores YoY (+25%); PAT ₹589 crores vs ₹358 crores (+64%)

    • 9M FY25 total income ₹7,041 crores vs ₹5,804 crores YoY; constant currency growth at 22%

    • 9M PBT ₹2,052 crores vs ₹1,450 crores; PAT ₹1,529 crores vs ₹1,062 crores

    • Product mix Q3: Generics 47%, Custom Synthesis 53%; 9M: 48%/52%

    • Kakinada Unit-III Phase 1 commenced commercial operations January 2025; ₹1,340 crores spent

    • Unit 1 and 2 at 80% capacity; Kakinada backward integration freeing GMP capacity

    • Nutraceutical business at ₹576 crores for 9M and ₹170 crores for Q3

    • Opted for new tax regime under Section 115BAA from FY25; cash on books ₹3,659 crores

    What Changed1

    vs Q4 FY25

    Guidance items4 → 2 (-2)
    Key financials

    Metrics

    6

    Periods

    2

    Q3

    3
    • Total Income
      ₹2,401 Cr
      YoY+25%
    • PBT
      ₹726 Cr
      YoY+48%
    • PAT
      ₹589 Cr
      YoY+64%

    9M

    3
    • Total Income
      ₹7,041 Cr
      YoY+21%
    • PBT
      ₹2,052 Cr
      YoY+42%
    • PAT
      ₹1,529 Cr
      YoY+44%

    Segment breakdown

    Generics
    47% Q3 Revenue Share
    Custom Synthesis
    53% Q3 Revenue Share
    Nutraceuticals
    ₹576 Cr 9M Revenue₹170 Cr Q3 Revenue
    Geographic Mix
    87% Export Share72% US+Europe Share
    Kakinada
    ₹1,340 Cr Total Spent₹1,157 Cr CWIP
    List

    Guidance & targets

    2
    CategoryTargetPriority
    Revenue
    Annual revenue growth target
    Double-digit growth consistently
    High
    Kakinada
    Phase 1 full commissioning
    Fully operational in about 6 months from Jan 2025
    High

    Risks & concerns

    6
    RiskSeverity

    Generic pricing pressure persists from heightened competition

    Volume growth in generics being partially offset by pricing pressure. Management expects gradual easing but no specific timeline.Management acknowledged

    medium

    Red Sea disruptions and port congestion adding 2-3 weeks to shipping times

    Vessels rerouted via South Africa. Mitigated through advance booking and strategic inventory buffers. Cautious optimism with Middle East ceasefire.Management acknowledged

    low

    Potential US tariffs on Indian pharma exports

    No India-specific tariffs announced yet. Management will take strategic decisions if and when tariffs materialize. European export mix provides diversification.Analyst downplayed

    low

    Areas of Evasion(3)

    • Contrast media segment breakdown
    • GLP-1 backward integration extent
    • Specific timeline for peptide revenue contribution

    Q&A highlights

    3

    “We make our own resins. We make our own building blocks. We make our own protected amino acids. And that's why we have a much more edge... in this GLP-1 right now the way things are looking, sky is the limit”

    Strongest bullish statement from management on GLP-1 opportunity; backward integration from amino acids to final peptides provides unique competitive edge

    asked by Vivek Agrawal (Citi Group)

    1 min read3 chapters

    Detailed Narrative

    01

    Custom Synthesis: Strong Momentum with GLP-1 Optionality

    CS grew to 53% of Q3 revenue with quarterly run rate of ₹1,200+ crores. Strong RFP pipeline driven by long-standing customer relationships and China Plus One benefits. GLP-1 opportunity spans building blocks (Fmoc-protected amino acids), fragments (tetramers to decamers), and full peptide molecules using both SPPS and LPPS. Company makes own resins and protected amino acids providing unique backward integration advantage. Also exploring oligonucleotides and new modalities.

    02

    Kakinada Unit-III: Strategic Manufacturing Expansion

    Phase 1 commenced commercial operations in January 2025 after ₹1,340 crores invested on 200 of 500 total acres. Seven production blocks manufacturing starting materials and registered starting materials for backward integration. No negative P&L impact expected as costs offset by input cost savings. Unit 1 and 2 at 80% utilization will see freed capacity for GMP products. Full Phase 1 operational in ~6 months, Phase 2 plans depend on market opportunities with 300 acres available.

    03

    Financial Performance: Margin Expansion on Operating Leverage

    Q3 revenue grew 25% YoY with 9M constant currency growth at 22%. EBITDA margins at ~32% driven by favorable CS mix and operating leverage. Material consumption stable at 40% of sales. Company opted for new tax regime under Section 115BAA from FY25. Generic segment showing volume recovery as post-COVID destocking normalizes, though pricing pressure persists. Cash position of ₹3,659 crores provides flexibility for capacity expansion.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.