Why Divi's Laboratories Share Price is Rising

The usual reliable growth of pharma stocks sputtered in early 2024 due to a mix of economic jitters and concerns around patent expirations.

Divi's Labs, a major player, was no exception. Its share price mirrored these anxieties with a 10% drop in the first two months of 2024.

However, lately the winds have changed for the company. In a turn of events, Divi's Labs' share price has jumped a whopping 11.6% in the last month.

This sharp rise has caught investor attention. What forces are driving the rally in Divi's Labs?

Read on to find out.

Good Financial Performance

Net profit for Q4FY24 jumped 68% year-over-year (YoY), reaching Rs 5.4 billion (bn) compared to Rs 3.2 bn in Q4FY23.

This growth can be attributed to declining and stabilising raw material prices throughout FY24, which improved the company's profitability.

Additionally, Q4 revenue also witnessed an 18% growth, rising to Rs 23 bn from Rs 19.5 bn in the previous year's corresponding quarter. This growth is likely due to rising market demand.

While Q4 delivered strong results, the full-year picture shows a slight dip in profit.

Consolidated revenue for FY24 grew 18% to Rs 78.4 bn compared to Rs 77.7 bn in FY23, reflecting continued growth in demand.

However, full-year profit after tax (PAT) decreased slightly, going from Rs 18.2 bn in FY23 to Rs 16 bn in FY24. Rising transportation costs are a possible culprit for this decline in overall profits despite the revenue growth.

What Next?

Not long ago, pharma companies faced a tough atmosphere due to geopolitical uncertainties around the globe. The red sea crisis and the collapse of the Baltimore bridge led to rising freight charges and prolonged sea voyages.

All these factors contributed to tough times for the pharma companies.

However, during these times Divi's Labs had a steady year due to stable raw material prices and growing market opportunities.

The company is actively pursuing the generic medicine business. It faced pricing pressure in this segment during the year.

Due to stable demand for its established products, it was able to boost it sales volumes in the generic business segment.

The company's emerging generic products are progressively gaining market share. It has already patented several of its future generic products in various markets.

Once they are patented they will be soon commercialised.

Its custom business segment also continued to grow in FY24. During the year it realised consistent value from existing projects.

The management believes this segment will continue to grow as the company derives value from existing projects and undertakes new projects.

It recently announced that the company is in the process of entering into a long-term supply agreement with a customer. It's planning for capacity addition at its manufacturing facility with an estimated investment between Rs 6.5-7 billion (bn). This will be funded from internal accruals. The proposed facility is expected to be operational around January, 2027.

Also its Kakinada facility is progressing well and its production activity is expected to commence in FY25.

The company aims to maximise sustainable growth going forward.

Despite the positive outlook, the pharmaceutical industry is still vulnerable to external factors.

Hence an investor should closely monitor the pharma sector before making any investment decision.

How Divi's Labs Share Price has Performed Recently

In the past five days, Divi's Labs share price has rallied 10.5%. In the last month, it is up 11.6%.

In 2024, so far its share price surged 14.1% and more than 29.2% in the last year.

The stock touched its 52-week high of Rs 4,469.2 on 29 May 2024 and a 52-week low of Rs 3,3300 on 06 November 2023.

About Divi's Labs

Divi's Lab is a leading manufacturer of APIs (Active pharmaceuticals ingredients), intermediates, and registered starting materials in India.

The company has been operating for more than thirty years in Hyderabad, India. It's among the top pharmaceutical companies in the country.

It has over 14,000 professionals across departments as well as 350 scientists.

For more details about the company, you can have a look at Divi's Laboratories' factsheet and Divi's Laboratories' quarterly results on our website.

You can also compare Divi's Laboratories with its peers.

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