A brief presentation on Divi's Lab a listed CRAMS company. This presentation gives an overview of the company covering its business, valuation, SWOT, Comparative analysis, Industry, FDA Details

1. Divi's Laboratories
Bloomberg: DIVI IN
Prepared by:
Kartik Maniktala
Ujjwal Krishna
Vaishnavi

2. Why DIVI’S?
Largest Manufacturer of Pain Control Naproxen and cough suppressant Dextromethorphan (70% global market share), Among Top 3 API manufacturer in World
Rising outsourcing trend & cost control measure will benefits companies like DIVI’S with focus on supplying API for niche generics
Supply constraints in China, Safer Supplier (US FDA compliant),
Going for Capex and debottlenecking will provide future growth
High growth expectations from the company’s CRAMS (Contract Research and Manufacturing Services) business compare to peers
New capabilities being tapped in a niche segment – carotenoids
Strong R&D Capabilities and India Cost Arbitrage in IP , Filled of 42 DMF (drug master files),38 Patents & 5 generics
Currently 2nd largest pharma player by market value Rs461,384 Millions

3. The Company
Product portfolio comprises of
i) Generic APIs (Active Pharma Ingredients) and Nutraceuticals and
ii) Custom Synthesis of APIs, intermediates and specialty ingredients for
innovator pharma giants
• In next 5 years company expects growth to be driven by developed markets
due to their readiness to adopt new and innovative products.
• Other markets would see growth with rising affordability and per capita
income
• Company generates around 18% of revenue Naproxen
The company operates at two manufacturing locations:
• Unit I, at Hyderabad (Telangana)
• Unit-II at Visakhapatnam (Andhra Pradesh)
The Company has Research Centers at Sanathnagar,Hyderabad and at the
manufacturing sites.
52%
15%
20%
13%
SHAREHOLDING PATTERN (SEPT 19)
Promoters Mutual Fund Foreign Investors Non-Institutional

4. 27%
46%
12%
12%
3%
Geographical Revenue
Contribution FY19
America Europe Asia India RoW
Source: Annual report Source: Bloomberg

5. Strengths
Zero Debt, cash
rich manufacture
Weakness
High revenue
contribution from
CRAMS
Opportunities
Opportunities in
the Carotenoid
space
Threats
USFDA and
other regulatory
authority actions
Company Analysis and Debt Profile
Credit Rating
Outlook Stable
Long Term AA+
Short Term A1+
Source: Bloomberg, CARE

6. Competitor Analysis
COMPANY P/E EV/EBITDA P/B ROE (%) ROCE (%) D/E
DIVI'S LABORATORIES LTD 34.11 23.38 6.63 21.00 21.90 0.015
GLAXOSMITHKLINE PHARMACEUTIC 54.72 34.64 11.39 21.22 24.19 0.000
ALKEM LABORATORIES LTD 30.80 19.30 4.31 14.76 19.23 0.169
SANOFI INDIA LTD 36.28 22.14 6.22 17.93 25.84 0.000
ALEMBIC PHARMACEUTICALS LTD 17.55 12.44 3.77 23.66 21.95 0.342
AJANTA PHARMA LTD 23.02 15.80 3.97 18.06 18.38 0.008
SUN PHARMACEUTICAL INDUS 36.18 15.70 2.33 6.69 15.51 0.235
DR. REDDY'S LABORATORIES 24.05 14.01 3.22 14.10 19.13 0.274
Source: Bloomberg

7. Industry Outlook
 India accounts for 20% of global exports in generics.
 India pharmaceutical sector is expected to grow at a CAGR of 15%
 Investment (as % of sales) in R&D by major Indian pharma companies increased from 5.3% in FY12
to 8.5% in FY18
 Segments in Indian Pharmaceutical Sector
1)Active Pharmaceutical Ingredients(APIs)/Bulk Drugs - Divided into Branded and Generics category
2)Contract Research and Manufacturing Services (CRAMS)
3)Formulations
4)Biosimilar

8. Govt. Initiatives
Ayushman Bharat
National Health Mission
Pradhan Mantri Jan Arogya Yojana
National Pharma policy
Medical technology park
31%
19%16%
7%
7%
5%
15%
MAJOR EXPORT DESTINATION IN
INDIA'S PHARMA FY18 %
North America Africa EU ASEAN
LAC Middle East Others
Source: IBEF

9. Innovation
 Backward integration to basic starting material in most API’s
 Core concepts of manufacturing are designed around the principle of green
chemistry

10. FDA Checks
Dec 2016 Unit II Vizag
USFDA (Import Alert)
July 2017
Import Alert Lifted
Sept 2017
USFDA Inspection
Nov 2017
Warning Letter closed
July/August 2017
Ireland and Slovenia Inspection (No
observation)
Unit-I USFDA May 2018
No Observation
June 2019 Unit II
USFDA Inspection
No Observations
August 2019
Unit II Ireland and Slovenia Inspection
(No observation
Source: Company

11. Valuation (DCF)
Particulars Value
Risk free rate 6.519%
Equity risk premium 8.54%
Beta 0.79
Re-investment rate 63.50%
Growth rate 11.67%
Long term growth rate 10%
Cost of Equity 11.90%
Number of shares 265.47M
Current Market price Rs1738
Value per share Rs1389
% Downside 24.95%

12. Source: Research report

13. THANK YOU
QUESTIONS??