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    Divi's Lab.

    DIVISLABGood
    Healthcare·17 May 2025
    Management Summary

    Divi's Labs delivered strong FY25 with 18% constant currency growth and significant margin expansion (EBITDA from 29% to 32%). Custom synthesis continues to gain share (54% of revenue) driven by strong RFP pipeline and two major long-term supply agreements worth ~₹700 crores each. Kakinada Phase 1 production commenced supporting backward integration. Company actively working on GLP-1, GIP, GLP-2 analogs and small molecules with multiple innovators across different development phases.

    Highlights

    8
    • Q4 FY25 total income at ₹2,671 crores vs ₹2,382 crores YoY; PAT at ₹662 crores vs ₹538 crores

    • FY25 total income ₹9,712 crores vs ₹8,184 crores YoY; constant currency growth at 18%

    • FY25 PBT ₹2,916 crores vs ₹2,163 crores; PAT ₹2,191 crores vs ₹1,600 crores

    • Product mix: Generics 46%, Custom Synthesis 54% for FY25; Q4 was 49%/51%

    • Nutraceutical business at ₹781 crores for FY25 and ₹205 crores for Q4

    • Signed long-term supply agreement for advanced intermediates with leading global pharma company

    • Kakinada Unit-III Phase 1 commenced phased production in January 2025; ₹1,497 crores spent; 200 of 500 acres used

    • Cash on books ₹3,696 crores; CAPEX guidance ~₹1,400 crores + maintenance for FY26

    Key financials

    Metrics

    6

    Periods

    2

    Q4

    3
    • Total Income
      ₹2,671 Cr
      YoY+12%
    • PBT
      ₹864 Cr
      YoY+21%
    • PAT
      ₹662 Cr
      YoY+23%

    FY25

    3
    • Total Income
      ₹9,712 Cr
      YoY+19%
    • PBT
      ₹2,916 Cr
      YoY+35%
    • PAT
      ₹2,191 Cr
      YoY+37%

    Segment breakdown

    Generics
    46% FY25 Revenue Share49% Q4 Revenue Share
    Custom Synthesis
    54% FY25 Revenue Share51% Q4 Revenue Share
    Nutraceuticals
    ₹781 Cr FY25 Revenue₹205 Cr Q4 Revenue
    Geographic Mix
    88% Export Share73% US+Europe Share
    List

    Guidance & targets

    4
    CategoryTargetPriority
    Revenue
    Overall revenue growth
    Double-digit growth
    High
    Capex
    FY26 CAPEX
    ~₹1,400 crores plus maintenance
    High
    Custom Synthesis
    Long-term supply agreement commercialization
    Revenue impact by Q3 CY2026 / Q4 CY2026 or January 2027
    Medium
    Kakinada
    Phase 1 remaining CAPEX
    ~₹200 crores additional
    High

    Risks & concerns

    7
    RiskSeverity

    Generic pricing pressure from heightened competition

    Continuous pricing pressure in generics segment. Company maintaining volumes through process innovation and efficiency but margins under pressure.Management acknowledged

    medium

    Red Sea disruptions extending shipping times by 2-3 weeks

    Vessel rerouting around Cape of Good Hope impacting both inbound raw materials and outbound shipments. Mitigated through safety stock management and advance logistics planning.Management acknowledged

    low

    US pharma reshoring announcements

    Large pharma companies announcing US manufacturing CAPEX. Management sees no impact on long-term CS contracts and pipeline. Not concerned at this point.Analyst downplayed

    low

    Areas of Evasion(4)

    • Order book quantum
    • GLP-1 specific investments
    • Dedicated vs multi-purpose blocks for CS contracts
    • Generic segment specific growth guidance

    Q&A highlights

    3

    “we believe we are best suited now to work on innovative molecules in the GLP space... we have long-term supply agreements with several customers”

    Strategic decision to focus on higher-margin innovator partnerships for GLP-1/GIP/GLP-2 rather than competing in generic semaglutide market

    asked by Amay (JM Financials)

    1 min read4 chapters

    Detailed Narrative

    01

    Custom Synthesis Momentum: Multiple Long-Term Agreements

    Custom synthesis contributed 54% of FY25 revenue, up from historical levels. Two major long-term supply agreements signed (~₹700 crores each) - one for an active API and another for advanced intermediates. Commercialization expected late 2026/early 2027 post regulatory approvals. Strong RFP pipeline driven by both organic demand and China Plus One/Biosecure Act tailwinds. Company working with innovators on GLP-1, GIP, GLP-2 analogs and small molecules across various development phases.

    02

    Kakinada Unit-III: Backward Integration Scaling

    Phase 1 production commenced January 2025 on 200 of 500 total acres with 7 production blocks. Total spend of ₹1,497 crores with ~₹200 crores remaining for Phase 1 completion. Backward integration benefits beginning to flow into product costs. Phase 1 also frees capacity at Unit I and Unit II for GMP products while Kakinada goes through its own regulatory phase. Phase 2 expansion plans depend on market opportunities with 300 acres available.

    03

    Margin Expansion: Operating Leverage and Product Mix

    FY25 EBITDA margins expanded from 29% to 32% driven by favorable product mix (higher CS share), operating leverage on 18% constant currency growth, and other expenses declining from 17% to 14% of sales. Material consumption stable at ~40% of sales. Forex gains of ₹48 crores for FY25. Management expects quarter-to-quarter margin variability based on product mix but targets consistent double-digit growth trajectory.

    04

    Peptide and Emerging Capabilities Investment

    Active investments in both solid-phase and liquid-phase peptide synthesis for GLP-1 and related molecules. Working exclusively with innovators rather than generic peptide market. Continuous flow chemistry and biocatalysis being deployed for sustainable manufacturing. ADCs and nucleotides in preliminary phases. Cash position of ₹3,696 crores provides ample firepower for capacity expansion as CS opportunities materialize.

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