From meeting the needs of its people to supplying affordable medicines worldwide during challenging times, the Indian pharmaceutical industry has stood the test of time. In FY22, the Indian pharmaceutical industry was valued at $49 billion, growing at a rate of 9% compared to FY21. In this blog, we will analyze Divis Laboratories share price, one of India’s top-performing export-oriented leading generic drug manufacturers.
In the last 5 and 10 years, Divis Laboratories share price has increased at a CAGR of 24% and 19%, respectively. Meaning ₹ 1,00,000 invested in 2012 would have grown around six times to reach ₹ 5,69,468. Let’s look closer at the growth potential of Divis Laboratories share price over the long term.
Divis Laboratories Company Journey
Divi Murali established Divi’s Laboratories on October 12 1990, as Divi’s Research Centre (DRC), with research and development as their prime focus. Between 1991 and 93, the company successfully developed and commercialized processes for intermediates and bulk actives and supplies to manufacturing majors.
Following its initial success, DRC changed its name to Divi’s Laboratories Ltd in 1994 to reflect its growing areas of interest, including entering the manufacturing processes of generic APIs. It is how the journey of Divi’s Laboratories Ltd. to become one of the top 3 manufacturers of Active Pharmaceutical Ingredients (APIs) in the world started with the highest level of compliance.
In 1995, the company started operations from its first manufacturing facility at Choutuppal near Hyderabad, and in 2002, the second plant in Chippada near Vishakapatnam began operations.
Over the years, Divis Laboratories has established itself as a reliable supplier of generic APIs to big pharma companies worldwide. APIs are substances in medicine that give beneficial health effects to the medication.
In 2003, Divis Laboratories went for IPO and listed its stocks on National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
Divis Laboratories Business Operations
Divi’s Laboratories operates across three countries with a 16,500-strong workforce and 400 scientists working in three R&D centers across functions.
The company currently operates two manufacturing units. A third unit is coming up in Kakinada, Andhra Pradesh, delivering 1000 tonnes of non-potent to highly potent APIs to major pharmaceutical companies worldwide. The combined total reaction capacity of both units is over 14,500m3, making it one of the largest API manufacturing facilities in the world.
Both facilities manufacture Generic APIs, Nutraceutical ingredients, and custom synthesis for big pharma. Divi’s is the global leader in over ten generic APIs, supplying 1000s of tonnes to customers in 95 countries annually.
Generic APIs are used in generic drugs and are the same as original APIs but slightly differ in formulation, manufacturing process, excipients, taste, and color. And nutraceutical ingredients are vitamins, minerals, prebiotics, and probiotics used in food supplements.
As mentioned earlier, Divi’s Laboratories is an export-oriented company, meaning most of its revenue is earned from foreign countries. For instance, in FY22, Divis made 44% from the USA, 33% from Europe, 10% from India, 9% from the rest of Asia, and 4% from the rest of the world.
Dr Murali K. Divi is the founder and Managing Director at Divi’s Laboratories, overseeing the technical and financial operations of the company. He holds a PhD degree in Pharmaceutical Sciences from Kakatiya University, India.
Dr Kiran K. Divi is the Whole-time Director and CEO and has been with Divis for two decades. He overlooks the company’s corporate functions and operations at manufacturing facilities. Before joining Divis, he gained extensive knowledge of the US generics market and held a postgraduate degree in Pharmacy from JNTU, India.
Mr NV Ramana is the Executive Director and has been with Divis for 25 years. However, he overlooks the company’s strategic planning, sales and marketing, custom manufacturing, and nutraceutical ingredients development.
Mr Madhusudan Rao Divi is the Whole-time Director (Projects) and overlooks all aspects of manufacturing, engineering, sustainability, and environmental management.
Ms Nilima Prasad Divi is the Whole-time Director (Commercials), overseeing the company’s material sourcing and procurement, corporate finance, and investor relations.
Divis Laboratories Company Analysis
In FY22, the company recorded 31% year-on-year growth in revenue to ₹8,879 crores, driven by solid export volumes to the US. During the year, the company more than doubled its export revenue from the USA to ₹3,832 crores, from ₹1,5868 crores in FY21, an increase of over 142%.
And in the last five years, the company posted 18.27% CAGR growth in total consolidated revenue. However, in Q3FY23, the company reported a weak set of numbers, with consolidated revenue falling by ~32% year-on-year to ₹1,708 crores.
In FY22, EBITDA came in at ₹3,987.7 crores, a 38% growth year-on-year. The EBITDA margin for the year stands at 44%.
What is EBITDA Margin?
EBITDA stands for Earnings Before Interest Depreciation and Amortization, and the metric helps compare the company’s short-term financial and operational efficiency.
While in Q3FY23, due to weak sales numbers and input costs pressure, EBITDA tanked 63% year-on-year to ₹408 crores, and EBITDA margin slipped to the lowest ever at 23.9%.
Profit after Tax (PAT)
In FY22, profit after tax (PAT) grew by 51% year-on-year to ₹2,948.5 crores, and the net profit margin stood at 33%. While in Q3FY23, PAT nosedived 66% year-on-year to ₹306 crores.
Divis Labs Key Financial Ratios
The key financial ratios in FY22 are:
- Current Ratio: The company’s current ratio increased by 26.11% yearly to 7.10 times from 5.63 times in FY21. The increase is primarily due to increased bank deposits and other assets, thanks to improved financial performance.
- Debt-to-equity Ratio: The debt-to-equity ratio stands at zero, meaning zero debt in the company’s books.
- Operating profit margin: The operating profit margin during the year increased to 44.91% from 42.41% in FY 21.
- Inventory Turnover Ratio: During the year, the inventory turnover ratio improved by 8.36% to 3.76 times, meaning the company can sell and replenish 3.76 times its inventory.
Divis Laboratories Share Price History
Divis Laboratories launched its IPO on February 17 2003, and the size of the IPO was ₹ 44.87 crores. The proceeds of the issue were utilized to expand its manufacturing facility in Vishakapatnam. The equity shares were priced at ₹140 per share at the IPO.
Since the IPO, the company’s shares have undergone a split once in August 2007, in the ratio of 10:2, meaning one share was divided into five shares with a new face value of ₹2. And in 2009 and 2015, the company announced the issue of bonus shares in the ratio of 1:1, expanding its outstanding shares in the market. Therefore, we can call Divis Laboratories a true multibagger which has made fortunes for its investors.
All time high of Divis Laboratories share price is ₹5,425, which it made on October 18 2021. Pharma stocks were the only sector which bucked the pandemic blues and gave superior returns to investors during the period. In the last three years, Divis Laboratories gave a final dividend of ₹30 in 2022, ₹20 in 2021, and ₹16 in 2020.
As of December 2022, the company’s promoters hold a 51.94% stake, with FIIs and DIIs holding 15.15% and 20.67% stakes, respectively. The public owns the remaining 12.23% stake.
Divis Laboratories Share Price Target
There is no doubt Divis Laboratories has given investors superior returns since its stock market listing. However, due to a steep fall in revenue and net profit that missed estimates by a considerable margin in Q3FY23, Divis Laboratories share price has taken a beating. Moreover, Divis Laboratories share price tumbled ~27% in 2022.
This situation provides a unique opportunity for investors looking for fundamentally strong stocks trading at low valuations. Although Divis Laboratories share price growth potential outlook may look weak due to the recent fall, the long-term view seems reasonably robust.
According to Vantage Research, the global API market is expected to grow at a CAGR of 6.3% through 2028, reaching $251.3 billion. And region-wise, North America is expected to dominate the global API market.
And as per Pharmexcil, the Indian Pharma Industry is estimated to grow at a CAGR of 12% and reach $130 billion by 2030, out of which 60% of the value will come from exports.
With the third manufacturing unit nearing completion and the company’s increased focus on the US market, Divis Laboratories has strategically placed itself to grab the maximum opportunities in the generic API market and benefit investors in the long term.
Divis Laboratories Future Growth Potential
As the company earns most of its revenue (90% in FY22) through exports, it is exposed to global risks. Rapid demand change, foreign exchange risks, and other external threats can impact its profitability.
However, Divis Laboratories has demonstrated strong execution skills throughout its existence. As a result, it has emerged as one of the world’s top API manufacturers in 30 years, taking on big pharma companies.
Divi’s Laboratories’ profitability is expected to improve in the future, thanks to greenfield expansion plans in Kakinada that will add new capacity, the addition of new niche molecules in the API segment, and an improved outlook in the custom synthesis segment.
Disclaimer Note: The numbers mentioned in this article are only for information purposes. He/she should not consider this a buy/sell/hold recommendation from Research & Ranking. The company shall not be liable for any losses that occur.
How has Divis Laboratories share price performed in the last 10 and 5 years?
In the last 10 and 5 years, Divis Laboratories share price has grown at a CAGR of 18% and 22%, respectively. After adjusting to corporate actions, Divis Laboratories share price climbed from ₹9 on March 13, 2003, to the present price level of ₹2,780. Its all-time high level is ₹5,425, made on October 18 2021.
When was Divis Laboratories established?
Divis Laboratories was established on October 12 1990, as Divi’s Research Centre (BRC) by Dr Murali K Divi with a prime focus on research and development. The company is now a leading supplier of generic APIs to big pharma companies worldwide. The company went public on February 2003, and its shares are listed on the Bombay Stock Exchange, National Stock Exchange, and Hyderabad Stock Exchange.
What is the market capitalization of Divis Laboratories?
Divis Laboratories is a large-cap pharma company. With a share price (of ₹2,778), Divi’s Lab’s market capitalization is ₹73,12245 crores as of February 18, 2022.
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