Divi's Laboratories Limited — Q4 FY24 earnings call

Call held 25 May 2024

Management summary

Divi's ended FY24 with a strong Q4 (21% constant currency growth) despite flat full-year performance (-2% cc). CS crossed 51% of Q4 revenue for the first time, signaling the strategic mix shift. A major long-term CS supply agreement was signed involving ~₹650-700 crores of dedicated CAPEX. Generic pricing pressure persisted but volumes were maintained with new molecules like Ticagrelor and Lacosamide in the pipeline. Kakinada Phase 1 on track for Q3 FY25 start.

Highlights

  • Q4 FY24 total income ₹2,382 crores vs ₹2,017 crores YoY (+18%); constant currency growth 21%

  • Q4 PBT ₹713 crores; PAT ₹538 crores; material consumption at 39%

  • FY24 total income ₹8,184 crores; PBT ₹2,163 crores; PAT ₹1,600 crores; constant currency growth -2%

  • Q4 product mix: Generics 49%, CS 51%; FY24: Generics 55%, CS 45%

  • Nutraceutical business ₹188 crores for Q4 and ₹724 crores for FY24

  • Signed long-term supply agreement (~₹650-700 crores CAPEX) for CS project

  • Cash on books ₹3,980 crores; CWIP ₹778 crores; Kakinada commercialization expected Q3 FY25

  • Future generics pipeline: Ticagrelor, Lacosamide, Brivaracetam to contribute from FY26-27

Key financials

2 periods

Q4

  • Total Income
    ₹2,382 Cr
    YoY +18%
  • PBT
    ₹713 Cr
  • PAT
    ₹538 Cr

FY24

  • Total Income
    ₹8,184 Cr
  • PBT
    ₹2,163 Cr
  • PAT
    ₹1,600 Cr

What they filed

Q1 FY27: revenue up 26.2%, net profit up 60.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue2,302 2,297 2,536 2,357 2,660 +16%2,578 +12%2,793 +10%2,974 +26%
EBITDA729 747 881 743 895 +23%907 +21%943 +7%1,240 +67%
Net profit518 594 667 557 696 +34%598 +1%756 +13%891 +60%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Generics
    49% Q4 Share55% FY24 Share
  • Custom Synthesis
    51% Q4 Share45% FY24 Share
  • Nutraceuticals
    ₹188 Cr Q4 Revenue₹724 Cr FY24 Revenue
  • Geographic
    87% Export Share70% US+Europe

Guidance & targets

Kakinada

  • Commercialization start Kakinada · Q3 FY25 · High confidence Around Q3 FY25
    Kakinada would start operations during this year, probably around Q3 is what we are looking at

    — Nilima Prasad Divi

Generics

  • New molecules contributing Generics · FY26-FY27 · Medium confidence Ticagrelor, Lacosamide, Brivaracetam from FY26-27
    the other growth, what we are seeing is in our future generics like Ticagrelor, Lacosamide, Brivaracetam to name a few, where the growth will take place in the next few years

    — Dr. Kiran S. Divi

Risks & concerns

  • FY24 constant currency growth was -2% despite strong Q4

    medium

    Full year contraction reflects first three quarters of weak generic pricing and inventory destocking. Q4 recovery promising but sustainability uncertain.

    Management acknowledged

  • Generic pricing pressure with no clear stabilization timeline

    medium

    Pricing constraints across regulated and non-regulated markets. Could take 1-2 years to normalize based on historical cycles.

    Both acknowledged

Areas of evasion (3)

  • CS project details
  • Kakinada Phase 2 plans
  • Product-specific revenue

Q&A highlights

2 direct
Generic pricing stabilization outlook Direct
It's very hard to say when this will stabilize. Sometimes it takes one year, sometimes it takes 2 years. This has happened in the past in the year 2009-10, so it's repeating again, but prices will stabilize over time

Honest assessment of pricing cycle uncertainty; historical parallel to 2009-10 suggests multi-year normalization possible

Asked by Neha Manpuria (Bank of America)

Long-term CS supply agreement and dedicated CAPEX Partial
The information we already shared is what we could actually share till even now, because we are bound by confidentiality

~₹650-700 crore dedicated CAPEX project signals significant long-term CS opportunity but details remain confidential

Asked by Surya N Patra (PhillipCapital)

Q4 strong CS mix shift driving profitability Direct
Product mix for generics to Custom Synthesis is 49% to 51% for the quarter

First quarter where CS exceeded generics, validating strategic pivot; material consumption at favorable 39%

Asked by Multiple analysts

1 min read 3 chapters

Detailed narrative

Strong Q4 Recovery After Weak FY24

Q4 FY24 delivered 21% constant currency growth and CS mix of 51% against a full-year cc growth of -2%. The quarter marked an inflection point with custom synthesis momentum improving significantly. Material consumption at 39% was favorable. FY24 total income stood at ₹8,184 crores with ₹1,600 crores PAT. Cash position remained strong at ₹3,980 crores despite Kakinada investments.

Custom Synthesis Pipeline and Long-Term Agreements

CS crossed 51% of Q4 revenue driven by increased customer engagement and RFP activity from China Plus One and regulatory trends. A major long-term supply agreement requiring ~₹650-700 crores dedicated CAPEX was signed, expected to contribute from FY27 timeline. Protected amino acids business for GLP-1 innovators continuing. Contrast media progressing through qualifications with multiple innovators.

Generic Business: Volume Stable, Pricing Under Pressure

Core generics like Naproxen, Gabapentin maintained volumes with Naproxen seeing 1% market growth. Future generics pipeline includes Ticagrelor, Lacosamide, Brivaracetam expected to contribute from FY26-27. Industry-wide pricing deflation comparable to 2009-10 cycle. Management maintains volumes through process efficiency and leadership position but honest about uncertain pricing recovery timeline.

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