Divi's Laboratories (DIVLAB)

CMP: | 4716 Target: | 5600 (19%) Target Period: 12 months BUY

November 24, 2021

Custom synthesis drive numbers; generics muted…

About the stock: Divi’s is engaged in manufacturing generic APIs and

Company Update
Particulars
intermediates, custom synthesis (CS) of active ingredients and advanced
intermediates for pharma MNCs, other speciality chemicals like Carotenoids and Particular Amount
complex compounds like peptides and Nucleotide revenues. Market Capitalisation | 125202 crore
Debt (FY21) | 5 crore
 In CS, the company maintains strong relationship with global big pharma Cash & equivalents (FY21) | 123 crore
players while in generics it enjoys significant market share in products like EV | 125084 crore
Naproxen, Dextromethorphan and Gabapentin among others
52 week H/L 5425/3155
 Divi’s is fully backward integrated in products with high market share and Equity capital | 53.1 crore
the management intends to follow suit in other products Face value |2

Q2FY22 Results: Lower than estimates as higher CS nullified by muted generics.

Shareholding pattern
 Sales were up 13.6% YoY to | 1987.5 crore (in %) Sep-20 Dec-20 Mar-21 Jun-21 Sep-21

 EBITDA in Q2FY22 was at | 818 crore, up 10% YoY with margins at 41% Promoter 52.0 52.0 52.0 52.0 52.0
Others 48.0 48.1 48.1 48.1 48.1
 Consequent adjusted PAT was at | 606.5 crore (up 16.7% YoY)
What should investors do? Divi’s share price has grown by ~3.9x over the past Price Chart
five years (from ~| 1198 in June 2016 to ~| 4716 levels in November 2021).
6000 18000
 Maintain BUY on the back of strong outlook both in CS and generics based 5000 15000

ICICI Securities – Retail Equity Research

on significantly high visibility capex and customer stickiness 4000 12000
3000 9000
Target Price and Valuation: We value Divis at | 5600 i.e. 50x P/E on FY23E EPS 2000 6000
1000 3000
Key triggers for future price performance: 0 0

Aug-19

Aug-20

Aug-21
Feb-19

Feb-20

Feb-21
May-19

May-20

May-21
Nov-18

Nov-19

Nov-20

Nov-21
 The company has been building capacities in a few more niche APIs as per
the evolving demand scenario in the backdrop of ‘China plus one’
opportunities Divis (L.H.S) NSE500 (R.H.S)

 Progress towards six identified growth areas- 1) Established generics, 2) Recent Event & Key risks
Existing generics, 3) New generics, 4) Sartan APIs, 5) Contrast Media, 6) CS
 Divi's became MSDs authorised
 Traction from some near term Covid opportunities such as Molnupiravir API API manufacturer for Molnupiravir
(MSD’s) authorised manufacturer
 Key Risk: (i) CGMP issues in
 Progress on the Kakinada greenfield project (planned outlay | 1000-2000 exports (ii) Delay in Capex plans
crore)
Research Analyst
Alternate Stock Idea: Apart from Divi’s, in our coverage we like Syngene.
Siddhant Khandekar
 Syngene is a contract research, development and manufacturing siddhant.khandekar@icicisecurities.com
organisation catering mainly to global innovator pharma\chemical
companies and is well poised to capitalise on growing opportunities globally
with client base growing from 256 to more than 400 over FY16-21
 BUY with a target price of | 710

Key Financial Summary

Key Financials 5 year CAGR 2 year CAGR
FY19 FY20 FY21 FY22E FY23E
(| crore) (FY16-21) (FY21-23E)
Revenues 4946.3 5394.4 6969.4 13.0 8276.6 9551.3 17.1
EBITDA 1871.8 1816.1 2848.7 15.0 3444.3 4031.3 19.0
EBITDA margins (%) 37.8 33.7 40.9 41.6 42.2
Adj. Net Profit 1352.7 1376.5 1984.3 12.0 2458.9 2972.6 22.4
Adjusted EPS (|) 51.0 51.9 74.7 92.6 112.0
PE (x) 92.6 91.0 63.1 50.9 42.1
EV to EBITDA (x) 65.6 67.3 42.1 34.9 29.7
RoNW (%) 19.4 18.8 21.3 22.2 22.4
RoCE (%) 25.5 23.9 27.6 28.1 28.5
Source: Company, ICICI Direct Research
 Company Update | Divi’s Laboratories ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

Q2FY22 Results: Robust performance continues
 Q2 revenues grew 13.6% YoY to | 1987.5 crore (I-direct estimate: | 2116.7
crore). EBITDA margins declined 121 bps YoY to 41.2% (I-direct estimates
of 41%) mainly due to higher other expenditure. Subsequently, EBITDA
grew 10.4% YoY to | 818.1 crore (I-direct estimate: | 867.8 crore). Net profit
grew 16.7% YoY to | 606.5 crore (I-direct estimate: | 641.5 crore) in-line
with a strong operational performance.

 Divi’s Laboratories reported a steady Q2FY22 performance. Q2 topline and

net profit were slightly below I-direct estimates. More than strong quarterly
performance, the important narrative for Divi’s is its unprecedented capex
plans to further augment capacities besides preparing for growing
opportunities arising due to China plus one factor. It has earmarked an
aggressive capex of ~| 3700 crore [| 1800 (existing plans) + | 400 (custom
synthesis blocks) + | 1500 (greenfield Kakinada plant) crore], over and
above ~| 2000 crore spent in the last five years. Divi’s remains a
quintessential play on the Indian API/CRAMs segment with its product
offerings and execution prowess.

Q2FY22 Earnings Conference Call highlights

 Total | 440 crore CWIP outstanding (new generic molecules); | 300 crore –
Capex H2FY22

 Next capex for Kakinada likely in the range of | 1000-2000 crore, timeline
dependent on how soon the land is delivered to company.

 All cases for Kakinada project dismissed by high court

 Power outages in China have impacted supplies from China. Divi’s has
secured required materials

 Volatility in global supply chain - Shipping cost has increased, containers

unavailability, management watchful of margins

 Capex for debottlenecking and upgrading utility on track and resulting in

minimal supply risk disruption.

 As per the management, MSD expects sales from Molnupiravir to be around

US$1 Billion in FY22, FY23E ~ US$5-6 Billion. Given the market size for
Molnupiravir, the opportunity size remains intact

 Divis has commenced operations at both DC and DCV SEZ, new plants and
has done the validation rounds as well

 Export – 88% of revenue, EU and US – 72%

 Nutraceutical - | 168 crores

 Revenue bifurcation - Generic: CS: 46:54 mix for Q2FY22

 Constant currency topline growth of 15% in Q2FY22

 Some sales from molnupiravir in Q2FY22

 Divis do not face any impurities issue in Sartans

ICICI Securities | Retail Research 2

 Company Update | Divi’s Laboratories ICICI Direct Research

Exhibit 1: Variance Analysis

Q2FY22 Q2FY22E Q2FY21 Q1FY22 YoY (%) QoQ (%) C omments
Revenue 1,987.5 2,116.7 1,749.3 1,960.6 13.6 1.4 YoY growth supported by strong growth growth in CS segment
Raw Material Expenses 654.8 719.7 576.3 642.1 13.6 2.0
Gross Margins (%) 67.1 66.0 67.1 67.2 0 bps -20 bps
Employee Expenses 224.0 243.4 193.2 220.8 15.9 1.4
Other Expenditure 290.6 285.8 238.7 245.7 21.8 18.3
Total Expenditure 1,169.4 1,248.8 1,008.2 1,108.6 16.0 5.5
EBITDA 818.1 867.8 741.1 852.1 10.4 -4.0
EBITDA (%) 41.2 41.0 42.4 43.5 -121 bps -230 bps YoY decline mainly due to higher employee and other expenditure
Interest 0.2 0.3 0.2 0.3 31.3 -25.0
Depreciation 77.4 73.3 61.1 73.3 26.5 5.6
Other income 19.1 38.8 13.6 36.0 40.1 -46.9
PBT Before EO 759.6 833.1 693.5 814.5 9.5 -6.7
EO 0.0 0.0 0.0 0.0 NA NA
PBT 759.6 833.1 693.5 814.5 9.5 -6.7
Tax 153.2 191.6 173.9 257.4 -11.9 -40.5
Strong YoY growth mainly in sync with operational performance,
Net Profit 606.5 641.5 519.6 557.1 16.7 8.9
higher other income being partially offset by higher depreciation
Key M etrics
Generic 746.3 1,049.8 874.9 842.3 -14.7 -11.4
CS 1,073.3 874.7 699.7 980.3 53.4 9.5
Carotenoid 168.0 192.2 174.7 138.0 -3.8 21.7
Source: Company, ICICI Direct Research

Exhibit 2: Change in estimates

FY22E FY23E Comments
(| Crore) Old New % Change Old New % Change
Revenue 8,304.6 8,276.6 -0.3 9,938.2 9,551.3 -3.9 Changed mainly due to lower than expected Q2FY22 Generics
EBITDA 3,474.2 3,444.3 -0.9 4,154.2 4,031.3 -3.0
EBITDA Margin (%) 41.8 41.6 -18 bps 41.8 42.2 41 bps
Net Profit 2,512.7 2,458.9 -2.1 3,087.0 2,972.6 -3.7
EPS (|) 94.7 92.6 -2.2 116.3 112.0 -3.7
Source: ICICI Direct Research

Exhibit 3: Assumptions
Current Earlier Comments
(| Crore) FY20 FY21 FY22E FY23E FY22E FY23E
Generic API & Intermediates 2,740.0 3,561.6 3,337.6 4,008.9 4,043.5 4,936.4 Changed due to lower than expected Q2FY22
Carotenoids 443.0 597.6 652.2 750.0 661.3 760.5
Custom Synthesis 2,211.4 2,805.1 4,286.9 4,792.5 3,599.8 4,241.3
Source: ICICI Direct Research

Exhibit 4: Financial Summary

Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE
(| crore) (%) (|) (%) (x) (X) (%) (%)
FY20 5394 9.1 51.9 1.8 91.0 67.3 18.8 23.9
FY21 6969 29.2 74.7 44.2 63.1 42.1 21.3 27.6
FY22E 8277 18.8 92.6 23.9 50.9 34.9 22.2 28.1
FY23E 9551 15.4 112.0 20.9 42.1 29.7 22.4 28.5
Source: ICICI Direct Research

ICICI Securities | Retail Research 3

 Company Update | Divi’s Laboratories ICICI Direct Research

Exhibit 5: Trends in Quarterly Performance

(| crore) Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 YoY (%) QoQ (%)
Total Operating Income 1285.0 1342.9 1256.4 1162.9 1445.6 1396.3 1389.7 1730.5 1749.3 1701.4 1788.2 1960.6 1987.5 13.6 1.4
Raw Material Expenses 473.2 480.2 503.0 452.3 593.7 547.1 515.4 639.8 576.3 526.6 581.4 642.1 654.8 13.6 2.0
% of revenues 36.8 35.8 40.0 38.9 41.1 39.2 37.1 37.0 32.9 31.0 32.5 32.8 32.9 0.4 19.6
Gross Profit 811.8 862.7 753.5 710.6 851.9 849.1 874.3 1090.6 1173.0 1174.8 1206.8 1318.5 1332.7 13.6 1.1
Gross Profit Margin (%) 63.2 64.2 60.0 61.1 58.9 60.8 62.9 63.0 67.1 69.0 67.5 67.2 67.1 -0.4 -19.6
Employee Expenses 134.7 136.5 138.3 140.9 150.6 156.5 173.1 183.9 193.2 233.6 215.1 220.8 224.0 15.9 1.4
% of revenues 10.5 10.2 11.0 12.1 10.4 11.2 12.5 10.6 11.0 13.7 12.0 11.3 11.3 22.6 0.8
Other Expenses 163.0 203.0 204.1 182.6 210.8 198.7 256.7 206.7 238.7 250.0 275.5 245.7 290.6 21.8 18.3
% of revenues 12.7 15.1 16.2 15.7 14.6 14.2 18.5 11.9 13.6 14.7 15.4 12.5 14.6 97.7 209.4
Total Expenditure 770.9 819.6 845.3 775.7 955.0 902.4 945.3 1030.4 1008.2 1010.2 1071.9 1108.6 1169.4 16.0 5.5
% of revenues 60.0 61.0 67.3 66.7 66.1 64.6 68.0 59.5 57.6 59.4 59.9 56.5 58.8 120.7 229.7
EBITDA 514.1 523.3 411.1 387.1 490.6 493.9 444.5 700.1 741.1 691.2 716.3 852.1 818.1 10.4 -4.0
EBITDA Margins (%) 40.0 39.0 32.7 33.3 33.9 35.4 32.0 40.5 42.4 40.6 40.1 43.5 41.2 -120.7 -229.7
Interest 0.2 2.5 0.1 0.3 3.8 1.6 0.4 0.2 0.2 0.3 0.2 0.3 0.2 31.3 -25.0
Depreciation 42.4 42.5 42.3 43.8 45.9 46.7 49.8 56.2 61.1 68.2 70.1 73.3 77.4 26.5 5.6
Other Income 80.1 34.6 41.7 30.3 47.0 41.7 76.7 17.3 13.6 19.3 23.5 36.0 19.1 40.1 -46.9
PBT before forex & EO 551.6 512.9 410.4 373.3 487.9 487.3 471.0 661.0 693.5 642.1 669.5 814.5 759.6 9.5 -6.7
Total Tax 153.9 133.4 121.0 100.9 131.1 128.2 82.7 168.9 173.9 171.5 167.5 257.4 153.2 -11.9 -40.5
Tax rate (%) 27.9 26.0 29.5 27.0 26.9 26.3 17.6 25.6 25.1 26.7 25.0 31.6 20.2 -491.3 -1143.7
PAT 397.7 379.5 289.4 272.4 356.8 359.1 388.2 492.1 519.6 470.6 502.0 557.1 606.5 16.7 8.9
PAT Margin (%) 30.9 28.3 23.0 23.4 24.7 25.7 27.9 28.4 29.7 27.7 28.1 28.4 30.5
EPS (|) 15.0 14.3 10.9 10.3 13.4 13.5 14.6 18.5 19.6 17.7 18.9 21.0 22.8
Source: ICICI Direct Research

ICICI Securities | Retail Research 4

 Company Update | Divi’s Laboratories ICICI Direct Research

Exhibit 6: Revenues to grow at CAGR of 17% over FY21-23E Exhibit 7: EBITDA & EBITDA margins trend
11000 9551
10000 CAGR 17.1% 4500 4031 50
9000 8277 4000 3444
CAGR 13.0% 40.9
8000 6969 3500 2849 42.2
7000 3000 41.6 42
6000 4946 5394 37.8
2500 1872 1816
(| crore)

4064

(| crore)
5000 3776 3913 2000 37.5 35.6 33.7
1417 1446 1268

(%)
4000
1500 34
3000 32.4
2000 1000
1000 500
0 0 26
FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E
Revenues EBITDA EBITDA Margins (%)

Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

Exhibit 8: PAT & PAT margins trend Exhibit 9: RoE & RoCE trend
35
3500 40
2973 31.6
3000 30
2459 25.3 27.6 28.1 28.5
2500 35
1984 25 26.2 25.5
2000 23.9
31.1 20.0 22.2 22.4
(| crore)

29.8 1353 1377 30 21.3

(%)
29.7 20
(%)

1500 1126 1060 28.5 19.8 19.4 18.8

884 27.3
1000 26.1 25.5 25 15 14.9
500 22.6
0 20 10
FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E
Net Profit Net Profit Margins (%) RoCE (%) RoNW(%)

Source: ICICI Direct Research, Company Source: ICICI Direct Research, Company

ICICI Securities | Retail Research 5

 Company Update | Divi’s Laboratories ICICI Direct Research

Exhibit 10: ICICI Direct Universe Coverage (Healthcare)

Company I-Direct CMP TP Rating M Cap EPS (|) PE(x) RoCE (%) RoE (%)
Code (|) (|) (| cr) FY20 FY21 FY22E FY23E FY20 FY21 FY22E FY23E FY20 FY21 FY22E FY23E FY20 FY21 FY22E FY23E
Hospitals
Apollo Hospitals APOHOS 5361 5,930 Buy 77083 22.6 7.9 72.9 99.4 237.4 682.0 73.5 53.9 10.2 6.3 18.1 21.7 9.7 2.5 18.6 20.9
Narayana Hrudalaya NARHRU 583 650 Buy 11911 6.4 -0.7 16.4 18.3 91.8 NA 35.6 31.9 11.0 1.2 17.5 18.4 11.4 -1.3 23.3 20.9
Shalby SHALIM 147 170 Hold 1586 2.6 3.9 4.3 5.7 57.5 37.4 33.8 25.9 7.2 6.5 8.9 8.8 3.5 5.1 5.4 6.7
Aster DM ASTDM 203 250 Buy 10158 5.7 3.0 10.6 17.2 35.6 68.7 19.2 11.9 7.2 5.4 8.7 12.1 8.7 4.4 13.5 18.0
Healthcare Global HEAGLO 253 240 Hold 3174 -12.0 -21.7 15.6 8.4 NA NA 16.3 30.0 1.0 -0.9 7.6 10.4 NA NA NA 7.2
MNC Pharma
Abbott India ABBIND 19617 20,360 Buy 41684 279.0 325.0 362.3 471.9 70.3 60.4 54.1 41.6 30.7 33.8 35.3 37.2 24.4 26.5 27.6 28.9
P&G Health MERLIM 5005 6,555 Buy 8308 102.0 106.5 135.7 145.7 49.1 47.0 36.9 34.4 24.0 32.2 41.0 37.7 18.7 25.1 31.6 28.8
Sanofi India SANOFI 8072 9,800 Buy 18590 179.8 207.4 431.8 280.0 44.9 38.9 18.7 28.8 26.0 32.3 34.2 41.9 19.4 24.5 22.2 33.5
Pfizer PFIZER 4998 6,020 Buy 22865 111.3 108.8 139.7 158.4 44.9 45.9 35.8 31.6 18.5 27.6 27.5 26.3 15.0 20.8 22.3 21.2
Pharma
Ajanta Pharma AJAPHA 2049 2,500 Buy 17729 53.4 74.0 79.3 89.3 38.4 27.7 25.8 22.9 24.7 29.0 25.2 23.8 18.1 21.8 19.9 19.2
Alembic Pharma ALEMPHA 775 790 Hold 15225 44.4 59.9 33.3 39.6 17.4 12.9 23.3 19.6 21.0 24.2 11.9 13.9 27.1 23.0 11.7 12.6
Aurobindo Pharma AURPHA 666 795 Hold 39032 48.8 55.0 50.3 61.2 13.7 12.1 13.2 10.9 17.2 16.9 13.8 15.2 17.0 14.7 11.9 12.8
Biocon BIOCON 365 380 Hold 43746 5.8 6.1 5.4 9.3 62.7 59.9 67.8 39.3 10.2 7.6 7.8 10.0 10.4 9.6 7.9 12.2
Cadila Healthcare CADHEA 465 563 Hold 47558 14.0 21.5 21.9 22.8 33.3 21.6 21.2 20.4 10.7 12.6 13.7 14.0 13.8 16.9 15.3 14.1
Cipla CIPLA 905 1,085 Buy 72993 19.2 29.9 34.6 41.8 47.1 30.3 26.1 21.7 12.0 16.3 17.8 18.4 9.8 13.1 13.7 14.6
Dr Reddy's Labs DRREDD 4632 5,170 Hold 77056 121.8 117.3 181.2 204.2 38.0 39.5 25.6 22.7 9.6 13.1 16.3 17.3 13.0 11.1 14.9 14.7
Glenmark Pharma GLEPHA 519 580 Hold 14637 26.4 32.9 37.7 43.7 19.7 15.8 13.7 11.9 12.7 13.9 15.3 15.9 12.2 13.1 12.5 12.7
Ipca Laboratories IPCLAB 2051 2,490 Buy 26015 47.6 89.9 78.0 95.8 43.1 22.8 26.3 21.4 17.6 27.1 20.5 20.9 16.6 24.2 17.5 17.7
Jubilant Pharmova JUBLIF 603 625 Hold 9597 44.6 37.4 44.0 62.6 13.5 16.1 13.7 9.6 11.7 13.7 14.9 18.1 12.7 12.6 13.0 15.7
Lupin LUPIN 898 1,015 Hold 40770 -12.7 26.9 43.8 36.9 NA 33.4 20.5 24.3 9.7 9.1 8.0 12.6 -4.6 8.8 15.8 11.6
Natco Pharma NATPHA 831 925 Hold 15160 25.3 24.2 17.1 20.1 32.9 34.4 48.7 41.3 14.0 13.1 8.4 9.9 12.2 10.7 7.2 8.0
Sun Pharma SUNPHA 784 965 Buy 188108 16.8 30.0 30.6 32.2 46.7 26.1 25.6 24.3 10.0 14.2 16.7 16.3 8.9 15.5 14.2 13.2
Torrent Pharma TORPHA 2835 3,110 Hold 47975 60.6 74.0 78.3 103.7 46.8 38.3 36.2 27.3 15.4 17.7 21.0 22.6 21.2 21.4 19.4 21.5
Indoco Remedies INDREM 414 575 Buy 3826 2.6 10.1 17.3 23.9 158.3 41.0 23.9 17.3 4.6 11.7 19.8 21.5 3.5 12.1 17.6 20.2
Caplin Point CAPPOI 793 1,080 Buy 5995 28.4 32.0 38.3 45.0 27.9 24.7 20.7 17.6 26.5 25.4 25.1 24.8 22.7 20.4 20.1 19.4
Suven Pharmaceuticals SUVPH 514 600 Buy 13077 12.5 14.2 15.0 18.7 41.3 36.1 34.1 27.4 35.6 31.2 25.7 24.7 37.5 30.7 24.9 23.9
Advanced Enzymes ADVENZ 342 420 Buy 3827 11.6 13.1 13.0 16.1 29.6 26.2 26.3 21.3 19.6 19.4 16.8 18.3 15.4 15.1 13.2 14.1
Hester Biosciences HESPHA 2300 2,835 Buy 1957 34.3 44.4 56.1 68.9 67.1 51.8 41.0 33.4 14.0 16.2 14.9 17.6 14.5 16.5 18.0 18.9
API/CRAMS
Divi's Lab DIVLAB 4716 5,600 Buy 125195 51.9 74.7 92.6 112.0 90.9 63.1 50.9 42.1 23.9 27.6 28.1 28.5 18.8 21.3 22.2 22.4
Hikal HIKCHE 532 640 Buy 6558 8.1 10.8 17.2 21.4 65.7 49.3 31.0 24.9 12.8 15.1 17.7 18.5 12.2 14.3 18.7 19.1
Syngene Int. SYNINT 595 710 Buy 23784 10.3 10.1 9.8 13.9 57.7 58.7 60.8 42.7 14.5 11.5 12.6 15.5 16.8 13.5 13.2 14.9
Granules India GRANUL 317 350 Hold 7841 12.4 22.2 15.0 23.3 25.5 14.3 21.1 13.6 15.2 24.0 16.1 21.7 16.7 25.3 14.8 18.9
Laurus Labs LAULAB 504 670 Buy 27037 4.8 18.3 17.6 23.9 105.9 27.5 28.6 21.1 13.0 31.7 25.1 28.0 14.4 37.9 27.4 27.9
Source: ICICI Direct Research

ICICI Securities | Retail Research 6

 Company Update | Divi’s Laboratories ICICI Direct Research

Financial Summary

Exhibit 11: Profit and loss statement | crore Exhibit 12: Cash flow statement | crore
(Year-end March) FY20 FY21 FY22E FY23E (Year-end March)/(| crore) FY20 FY21 FY22E FY23E
Revenues 5,394.4 6,969.4 8,276.6 9,551.3 Profit/(Loss) after taxation 1,374.2 2,021.7 2,458.9 2,972.6
Growth (%) 9.1 29.2 18.8 15.4 Add: Depreciation & Amortization 186.2 255.6 305.3 339.5
Raw Material Expenses 2,108.5 2,324.1 2,735.8 3,127.2 (Inc)/dec in Current Assets -326.2 -503.6 -1,230.1 -800.9
Employee Expenses 621.1 825.8 932.6 1,055.6 Inc/(dec) in CL and Provisions 107.9 239.5 184.9 186.4
Other Expenses 848.8 970.9 1,163.9 1,337.2 Other Operating Activities -126.2 -66.3 0.9 0.1
CF from operating activities 1,215.9 1,946.9 1,720.0 2,697.8
EBITDA 1,816.1 2,848.7 3,444.3 4,031.3 (Inc)/dec in Fixed Assets -1,182.9 -910.0 -740.0 -800.0
Growth (%) -3.0 56.9 20.9 17.0 (Inc)/dec in Investments 1,056.3 860.1 -1,000.0 -1,200.0
Depreciation 186.2 255.6 305.3 339.5 Other Investing Activities 9.4 171.3 25.1 28.5
Interest 6.1 0.9 0.9 0.1 CF from investing activities -117.2 121.4 -1,714.9 -1,971.5
Other Income 195.8 73.8 96.7 219.7 inc/(dec) in Loan -61.2 -34.0 0.0 0.0
PBT 1,819.5 2,666.0 3,234.8 3,911.4 Dividend & Dividend tax -1024.1 0.0 -663.7 -796.4
Total Tax 442.9 681.8 775.9 938.7 Others -6.1 -0.9 -0.9 -0.1
CF from financing activities -1,091.4 -34.9 -664.6 -796.6
Adjusted PAT 1,376.5 1,984.3 2,458.9 2,972.6 Net Cash flow 7.4 2,033.4 -659.5 -70.3
Growth (%) 1.8 44.2 23.9 20.9 Opening Cash 115.3 122.6 2156.0 1496.5
Closing Cash 122.6 2,156.0 1,496.5 1,426.3
EPS (Adjusted) 51.9 74.7 92.6 112.0 Free Cash Flow 33.1 1,036.9 980.0 1,897.8
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

Exhibit 13: Balance Sheet | crore Exhibit 14: Key ratios

(Year-end March) FY20 FY21 FY22E FY23E (Year-end March) FY20 FY21 FY22E FY23E
Liabiltlies Per share data (|)
Equity Capital 53.1 53.1 53.1 53.1 Adjusted EPS 51.9 74.7 92.6 112.0
Reserve and Surplus 7,256.8 9,241.5 11,036.8 13,213.0 BV per share 275.4 350.1 417.7 499.7
Total Shareholders funds 7,309.9 9,294.6 11,089.9 13,266.1 Dividend per share 19.2 20.0 25.0 30.0
Total Debt 38.9 4.8 4.8 4.8 Cash Per Share 4.6 81.2 56.4 53.7
Deferred Tax Liability 274.0 338.1 378.6 424.1 Operating Ratios (%)
Non CL & Long Term Provisions 20.5 25.3 28.3 31.7 Gross margins 60.9 66.7 66.9 67.3
Total Liabilities 7,643.3 9,662.8 11,501.6 13,726.7 EBITDA margins 33.7 40.9 41.6 42.2
Assets Net Profit margins 25.5 28.5 29.7 31.1
Gross Block - Fixed Assets 3,514.3 4,691.9 5,672.7 6,172.7 Inventory days 126.1 112.3 126.1 126.1
Accumulated Depreciation 732.4 988.0 1,293.3 1,632.8 Debtor days 95.6 87.8 95.6 95.6
Net Block 2,781.9 3,703.9 4,379.4 4,539.9 Creditor days 40.0 40.0 40.0 40.0
Capital WIP 919.7 710.6 469.8 769.8 Asset Turnover 1.2 1.3 1.3 1.4
Total Fixed Assets 3,701.5 4,414.5 4,849.2 5,309.7 EBITDA conversion rate 67.0 68.3 49.9 66.9
Investments 971.4 0.0 1,000.0 2,200.0 Return Ratios (%)
Inventory 1,863.9 2,145.2 2,859.7 3,300.1 RoE 18.8 21.3 22.2 22.4
Debtors 1,413.4 1,676.5 2,168.5 2,502.5 RoCE 23.9 27.6 28.1 28.5
Loans and Advances 0.1 0.0 0.0 0.0 RoIC 43.2 72.7 53.2 49.2
Other Current Assets 308.6 196.9 220.6 247.0 Valuation Ratios (x)
Cash 122.6 2,156.0 1,496.5 1,426.3 P/E 91.0 63.1 50.9 42.1
Total Current Assets 3,708.5 6,174.7 6,745.3 7,475.9 EV / EBITDA 67.3 42.1 34.9 29.7
Creditors 590.7 763.2 906.3 1,045.9 Price to Book Value 17.1 13.5 11.3 9.4
Provisions 2.5 2.5 2.8 3.1 EV / Net Sales 22.7 17.2 14.5 12.5
Other current Liabilities 299.3 345.6 387.1 433.5 Market Cap / Sales 23.2 18.0 15.1 13.1
Total Current Liabilities 892.5 1,111.3 1,296.2 1,482.6 Solvency Ratios
Net Current Assets 2,816.0 5,063.4 5,449.1 5,993.3 Debt / EBITDA 0.0 0.0 0.0 0.0
Other Non CA & LT L & A 154.3 184.9 203.3 223.7 Debt / Equity 0.0 0.0 0.0 0.0
Application of Funds 7,643.3 9,662.8 11,501.6 13,726.7 Current Ratio 4.0 3.6 4.0 4.1
Source: Company, ICICI Direct Research Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 7

 Company Update | Divi’s Laboratories ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its
stocks according -to their notional target price vs. current market price and then categorizes them as Buy, Hold,
Reduce and Sell. The performance horizon is two years unless specified and the notional target price is defined
as the analysts' valuation for a stock

Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%

Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com

ICICI Securities | Retail Research 8

 Company Update | Divi’s Laboratories ICICI Direct Research

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ICICI Securities | Retail Research 9