28th March, 2025
INVESTMENT
IDEAS
DIVI’S LABORATORIES LIMITED CMP: 5753.90 Target Price: 7008 Upside: 22%
VALUE PARAMETERS Investment Rationale:
Face Value (Rs.) 2.00 Ÿ Divi's Laboratories Ltd. is a Hyderabad-based pharmaceutical powerhouse
known for its leadership in Active Pharmaceutical Ingredients (APIs),
52 Week High/Low 6448.75/3350.05
custom synthesis, and nutraceuticals. It serves over 100 countries and
[Link] (Rs. in Cr.) 152747.97 operates a robust, backward-integrated business model. Its revenue splits
EPS (Rs.) 77.86 into generics (49%), custom synthesis (41%), and nutraceuticals (10%),
giving it diversified streams and a competitive edge in high-margin, complex
P/E Ratio (times) 73.90 chemistry.
P/B Ratio (times) 11.14 Ÿ• The company has been ramping up its manufacturing footprint, with
Dividend Yield (%) 0.52 ongoing investments of ₹2,000–3,000 crore, including a Greenfield facility in
Kakinada. The Kakinada Unit 3 development, part of Phase I of the Kakinada
Stock Exchange BSE
facility, began commercial production in January 2025. This new facility
enhances backward integration and expands manufacturing capabilities.
SHAREHOLDING PATTERN The project is expected to be fully operational in about six months, with the
capacity from Units 1 and 2 being freed up as starting materials are shifted to
the Kakinada site.
Ÿ• Divi's Custom Synthesis business is experiencing strong growth with
increased customer engagements, more RFPs, and on-site visits. The
company’s long-standing relationships and expertise position it well in this
space, with active involvement in multiple projects. In the Generic business,
despite price pressures, stability is maintained, with expected growth from
upcoming patent expirations and new product additions. The current
product mix stands at 48% generics and 52% custom synthesis for the nine-
month period.
Ÿ• In Q3FY25, revenue increased by 25% year-on-year to ₹2,319 crore,
P/BV CHART compared to ₹1,855 crore in Q3FY24, driven by strong demand in custom
9000.00
synthesis and generic APIs. Net profit surged by 64.5% to ₹589 crore, up
8000.00 from ₹358 crore in the same quarter last year, reflecting improved
7000.00 operational efficiency and margin expansion. The profit growth outpaced
6000.00
revenue, demonstrating Divi's effective cost management despite ongoing
5000.00
4000.00
global inflationary pressures.
3000.00 Ÿ• The management of the company is optimistic about future growth, driven
2000.00
by a strong pipeline and strategic investments, while closely monitoring
1000.00
0.00
macroeconomic and geopolitical trends to mitigate risks. The EBITDA
margin stands at 32%, with a goal of sustainable double-digit growth.
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Margins are influenced by product mix and operational efficiency initiatives,
with expectations of operational leverage as the Kakinada facility ramps up.
6.00 9.00 12.00 15.00 Close Price
ŸRisk
Ÿ• Intensive Competition
FINANCIAL PERFORMANCE ([Link] Cr.)
Ÿ• Regulatory Risk
ACTUAL ESTIMATE
FY Mar-24 FY Mar-25 FY Mar-26 Valuation
The company has reported strong growth, supported by a debt-free balance sheet,
REVENUE 7845.00 9349.68 10832.58
strategic expansions, and a leadership position in APIs and CRAMS, enhancing its
EBITDA 2205.00 2910.60 3612.22 long-term attractiveness. Its established customer relationships, technological
EBIT 1827.00 2504.94 3160.12 expertise, and a robust project pipeline position it well for ongoing success in
custom synthesis. Despite industry price pressures, the company maintains
NET INCOME 1600.00 2129.79 2636.44 stability in generics, with growth anticipated from patent expirations and new
EPS 60.27 80.62 100.97 product introductions. The ramp-up of the Kakinada facility, alongside
operational efficiencies, is expected to drive margin expansion and operational
BVPS 511.21 559.42 629.11
leverage. Thus, it is expected that the stock may see a price target of Rs. 7008 in 8 to
RoE 12.17% 14.99% 17.00% 10 months’ time frame on current P/BVx of 11.14x and FY26 BVPS of Rs. 629.11.
Source: Company's Website, Reuters & Capitaline
DEEPAK FERTILISERS & PETROCHEM. CORP. LTD CMP: 1111.75 Target Price: 1337 Upside: 20%
VALUE PARAMETERS Investment Rationale:
Face Value (Rs.) 10.00 Ÿ Deepak Fertilisers and Petrochemicals Corporation Ltd. is a manufacturer of
industrial chemicals and fertilizers. With a strong presence in Technical
52 Week High/Low 1443.35/483.55
Ammonium Nitrate (mining chemicals), Industrial Chemicals and Crop
[Link] (Rs. in Cr.) 14034.49 Nutrition (fertilisers), the Company supports critical sectors of the economy
EPS (Rs.) 69.01 such as infrastructure, mining, chemicals, pharmaceutical and agriculture. It
has plants located in four states, namely Maharashtra (Taloja), Gujarat
P/E Ratio (times) 16.11
(Daher), Andhra Pradesh (Srikakulam) and Haryana (Panipat). The
P/B Ratio (times) 2.47 Company has commenced best in-class Technical Services to drive
Dividend Yield (%) 0.76 downstream productivity benefits for the mining end consumers.
Stock Exchange BSE Ÿ• On capex front, nitric acid project in Dahej and technical ammonium nitrate
project in Gopalpur are expected to go live in H2 FY 2026. It has established
distribution networks and customer bases, ensuring a smooth offtake from
SHAREHOLDING PATTERN these projects. Currently, the net debt stands at Rs.3,250 crores, with
expectations of it peaking at Rs. 5,500 crores by H2 FY 2026 due to ongoing
expansions. The management has reassured that strong operational cash
flow would help effectively manage debt levels moving forward, ensuring
financial stability.
Ÿ• Its world-scale ammonia plant, operational since August 2023, provides
greater control over pricing and product availability. Amid geopolitical
uncertainties, this strategic investment enables it to navigate market
volatility, ensuring stability and strengthening its competitive edge for all
three business segments and the complete value chain.
Ÿ• Its strategic pivot from commodity products to high-value specialty offerings
is powered by robust R&D, consumer insights, and market segmentation. In
P/E CHART the Industrial Chemicals sector, it is making strides with products such as
3000.00 steel-grade nitric acid and pharma-grade IPA. Its Mining Chemicals business
2500.00
is focused on Total Cost of Ownership (TCO) solutions. In its Crop Nutrition
business, it is transitioning from customer to end-consumer, with an
2000.00
expanding portfolio of crop-specific nutrient solutions.
1500.00
Ÿ• Recently, NCLT-approved company`s restructuring and demerger would
1000.00
unlock the full potential of each business unit. By adopting a more focused,
500.00 end-to-end approach, it will streamline operations, enabling it to pursue
0.00 strategic alliances and global joint ventures more effectively.
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Ÿ• In Q3FY2025, consolidated revenues have surged by 39% to Rs. 2579 crore,
driven by good monsoon and execution of crop focus value added strategy.
6 13 20 27 Close Price
EBITDA margin improved to 19% from 15% as result it increased by 72% to
Rs. 486 crore. PAT up by 318% to Rs. 253 crore.
FINANCIAL PERFORMANCE ([Link] Cr.) ŸRisk
ACTUAL ESTIMATE Ÿ• Commodity Price Volatility
FY Mar-24 FY Mar-25 FY Mar-26 Ÿ• Economic Slowdown
REVENUE 8676.09 10028.7 11100.6 Valuation
EBITDA 1286.69 1955.6 2231.2 The company delivered a robust Q3 FY2025, showcasing significant revenue
EBIT 952.96 1565.3 1801.4 growth and improved margins. Its ongoing corporate restructuring is poised to
enhance operational efficiency in the future. The addition of new capacity, a
NET INCOME 442.51 898 1051.9 strategic shift from commodity products to high-value specialty offerings, and the
EPS 35.05 71.00 83.00 adoption of smart factory initiatives through IT-enabled Sales and Operations
Planning (S&OP) systems bode well for DFPCL’s prospects. Thus, it is expected
BVPS 431.41 499.50 554.60
that the stock may see a price target of Rs. 1337 in 8 to 10 months’ time frame on
RoE 8.60% 15.20% 15.60% current P/E of 16.11x and FY26 (E) EPS of Rs.83.
Source: Company's Website, Reuters & Capitaline
Above calls are published in “Wise Money Issue No. 990”
E-mail: researchfeedback@[Link]
Corporate Office: Mumbai Office: Kolkata Office:
11/6B, Shanti Chamber, Lotus Corporate Park , A Wing 401 / 402 , 18, Rabindra Sarani,
Pusa Road, New Delhi - 110005 4th Floor ,Graham Firth Steel Compound, Poddar Court,Gate No.- 4, 5th Floor, Kolkata-700001
Tel: +91-11-30111000 Off Western Express Highway, Jay Coach Signal, Tel: 91-33-39847000, Fax: 91-33-39847004
[Link] Goreagon (East) Mumbai - 400063
Tel: 91-22-67341600, Fax: 91-22-28805606
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