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India Equity Research Reports, IPO and Stock News
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TP : Rs927
Investment Rationale
§ Company’s new multi-purpose plant at Vizag has commenced operation in Q1FY12. We expect this facility to
have a meaningful contribution in FY12. The company is further investing Rs1.75bn as capex in FY12E in order
to address shortfall in capacities in FY13
§ Management has guided for sales CAGR of 20% and EBITDA margins at 40% levels over FY11-13E on back of
good off-take from new products in the Generics segment and sustained momentum in the CSS business
§ Custom Synthesis and Generics business are set to grow at 20% CAGR over FY11-13E on the back of new
capacity additions. Company has set up a new multipurpose facility at Vizag which will be commissioned in
Q1FY12E. The investments in Nutraceuticals will see 100% CAGR with Rs2.5bn revenues over FY11-13E
§ Operating margins at 40% will be driven by a) improved product mix, b) higher contribution of high margin
Carotenoids business, and c) normalization of demand from US and Europe. Moreover with capex investment
stabilizing, benefits from operating leverage would come into play
§ Divi’s continues to maintain strong performance in the CRAMS space vis-à-vis its peers in terms of best-in-class
operating metrics. We value the company at 20x FY13E earnings
Valuations
§ We expect an earnings CAGR of 21% over FY11-13E
§ At CMP, the stock is trading at 18.9xFY12E EPS of Rs37.5 and 15.3xFY13E EPS of Rs46.3
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