Divi's Lab earns INR2,289.10m in net in Q4FY15, Firstcall recommends 'Buy'

1. CMP 1818.60
Target Price 2000.00
ISIN: INE361B01024
MAY 26th
2015
DIVI'S LABORATORIES LTD
Result Update (PARENT BASIS): Q4 FY15
BUYBUYBUYBUY
Index Details
Stock Data
Sector Pharmaceuticals
BSE Code 532488
Face Value 2.00
52wk. High / Low (Rs.) 1968.05/1217.00
Volume (2wk. Avg.) 40000
Market Cap (Rs. in mn.) 241419.15
Annual Estimated Results (A*: Actual / E*: Estimated)
YEARS FY15A FY16E FY17E
Net Sales 30840.10 35466.12 40076.71
EBITDA 12048.90 13698.91 15529.59
Net Profit 8470.60 9624.51 10875.05
EPS 63.81 72.50 81.92
P/E 28.50 25.08 22.20
Shareholding Pattern (%)
1 Year Comparative Graph
DIVIS LABORATORIES LTD BSE SENSEX
SYNOPSIS
Divis Laboratories Ltd is engaged in manufacture of
generic APIs, custom synthesis of active ingredients
for innovator companies and other specialty
chemicals like peptides and nutraceuticals.
Revenue for the quarter rose by 10.33% to Rs.
8170.90 mn from Rs. 7406.00 mn, when compared
with the prior year period.
During Q4 FY15, Net profit was at Rs. 2289.10 mn
against Rs. 1930.60 mn in Q4 FY14, an increase of
18.57%.
During Q4 FY15, EBIDTA is Rs. 3276.60 mn as
against Rs. 2712.00 mn in the corresponding period
of the previous year, grew by 20.82%.
PBT for the quarter was at Rs. 2825.30 mn as
compared to Rs. 2449.00 mn in the corresponding
period of the previous year, an increase of 15.37%.
EPS of the company stood at Rs. 17.24 a share
during the quarter, registering 18.57% growth over
previous year period.
Divis Laboratories Ltd has recommended a dividend
of 1000% i.e. Rs. 20/- per equity share of Rs. 2/-
face value for the year ended March 31, 2015.
During FY15, Exports contributed 87% of sales and
about 73% to advanced markets in North America
and Europe.
Net Sales and PAT of the company are expected to
grow at a CAGR of 17% and 15% over 2014 to
2017E respectively.
PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Divis Laboratories Ltd 1818.60 241419.15 63.81 28.50 6.78 1000.00
Cadila Healthcare Ltd 1743.40 356958.60 62.08 28.08 7.28 240.00
Torrent Pharmaceuticals Ltd 1231.25 208355.50 36.82 33.44 7.15 225.00
IPCA Laboratories Ltd 660.00 83291.40 30.54 21.61 4.20 250.00

2. QUARTERLY HIGHLIGHTS (PARENT BASIS)
Results updates- Q4 FY15,
Months Mar-15 Mar-14 % Change
Net Sales 8170.90 7406.00 10.33%
PAT 2289.10 1930.60 18.57%
EPS 17.24 14.54 18.57%
EBITDA 3276.60 2712.00 20.82%
The company’s Revenue for the quarter rose by 10.33% to Rs. 8170.90 million from Rs. 7406.00 million, when
compared with the prior year period. Net profit was at Rs. 2289.10 million against Rs. 1930.60 million in the
corresponding quarter ending of previous year, an increase of 18.57%. Reported earnings per share of the
company stood at Rs. 17.24 a share during the quarter, registering 18.57% growth over previous year period.
Profit before interest, depreciation and tax is Rs. 3276.60 million as against Rs. 2712.00 million in the
corresponding period of the previous year.
Break up of Expenditure
Latest Updates
• Divis Laboratories Ltd has recommended a dividend of 1000% i.e. Rs. 20/- per equity share of Rs. 2/- face
value for the year ended March 31, 2015.
• Exports contributed 87% of sales and about 73% to advanced markets in North America and Europe.
• During the year, Divis Laboratories Ltd has capitalized fixed assets aggregating to Rs.2300.00 million.
Break up of
Expenditure
Rs. Million
Q4 FY15 Q4 FY14 % Change
Consumption of Raw
Materials
3918.60 2217.80 77%
Depreciation &
Amortization
Expenses
445.40 253.90 75%
Employees Benefit
Expenses
789.00 591.50 33%
Other Expenditure 1257.80 1153.80 9%

3. COMPANY PROFILE
Divi’s operates from its Headquarters and Registered Office at Hyderabad. The company has four multi-purpose
manufacturing facilities with all support infrastructures like Utilities, environment management and safety
systems.
Divi’s is engaged in manufacture of generic APIs, custom synthesis of active ingredients for innovator companies
and other specialty chemicals like peptides and nutraceuticals. The company constantly reviews its policies and
procedures to adhere to conformity to the various regulatory approvals for its manufacturing facilities and its
commitment to IPR.
Business Areas
The product portfolio of the company comprises of two broad segments:
i) Generic APIs (active pharma ingredients) and Nutraceuticals and
ii) Custom Synthesis of APIs, intermediates and specialty ingredients for innovator pharma giants.
The company operates predominantly in export markets and has a broad product portfolio under generics and
custom synthesis. Business has been growing decently across both these segments & is broadly equal distributed.

4. FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)
Balance sheet as at March31, 2014 to 2017E
DIVI'S LABORATORIES LTD. FY14A FY15A FY16E FY17E
SOURCES OF FUNDS
Shareholder's Funds
Share Capital 265.50 265.50 265.50 265.50
Reserves and Surplus 30078.69 35354.10 41010.76 46752.26
1. Sub Total - Net worth 30344.19 35619.60 41276.26 47017.76
Non Current Liabilities
Long Term Borrowings 15.50 10.50 9.24 8.50
Deferred Tax Liabilities 1216.71 1324.50 1430.46 1516.29
Long Term Provisions 31.82 69.90 80.39 90.03
2. Sub Total - Non Current Liabilities 1264.03 1404.90 1520.09 1614.82
Current Liabilities
Short Term Borrowings 163.23 250.70 275.77 297.83
Trade Payables 1486.93 2243.80 2535.49 2763.69
Other Current Liabilities 1465.49 2027.30 2371.94 2585.42
Short Term Provisions 3115.78 3201.40 3329.46 3495.93
3. Sub Total - Current Liabilities 6231.43 7723.20 8512.66 9142.86
Total Liabilities (1+2+3) 37839.65 44747.70 51309.00 57775.45
APPLICATION OF FUNDS
Non-Current Assets
a) Fixed Assets 13660.87 15269.00 18017.42 20720.03
b) Non-current investments 28.16 28.20 31.02 33.19
c) Long Term Loans and Advances 1190.24 1490.70 1699.40 1886.33
1. Sub Total – Non Current Assets 14879.27 16787.90 19747.84 22639.56
Current Assets
Current Investment 5018.76 7330.00 8502.80 9608.16
Inventories 8932.71 11149.00 12946.65 14774.28
Trade receivables 7916.36 8230.30 8724.12 9247.57
Cash and Bank Balances 357.68 566.60 651.59 723.26
Short-terms loans & advances 673.75 591.60 627.10 658.45
Other current assets 61.12 92.30 108.91 124.16
2. Sub Total - Current Assets 22960.38 27959.80 31561.16 35135.89
Total Assets (1+2) 37839.65 44747.70 51309.00 57775.45

5. Annual Profit & Loss Statement for the period of 2014 to 2017E
Value(Rs.in.mn) FY14A FY15A FY16E FY17E
Description 12m 12m 12m 12m
Net Sales 25139.70 30840.10 35466.12 40076.71
Other Income 839.00 428.40 505.51 540.90
Total Income 25978.70 31268.50 35971.63 40617.61
Expenditure -14951.10 -19219.60 -22272.72 -25088.02
Operating Profit 11027.60 12048.90 13698.91 15529.59
Interest -20.60 -18.60 -16.74 -17.74
Gross profit 11007.00 12030.30 13682.17 15511.84
Depreciation -920.60 -1358.50 -1575.86 -1780.72
Profit Before Tax 10086.40 10671.80 12106.31 13731.12
Tax -2169.20 -2201.20 -2481.79 -2856.07
Net Profit 7917.20 8470.60 9624.51 10875.05
Equity capital 265.50 265.50 265.50 265.50
Reserves 30078.69 35354.10 41010.76 46752.26
Face value 2.00 2.00 2.00 2.00
EPS 59.64 63.81 72.50 81.92
Quarterly Profit & Loss Statement for the period of 30th Sep, 2014 to 30th June, 2015E
Value(Rs.in.mn) 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15E
Description 3m 3m 3m 3m
Net sales 8331.40 7911.20 8170.90 7797.49
Other income 155.40 199.40 125.40 132.92
Total Income 8486.80 8110.60 8296.30 7930.41
Expenditure -5263.40 -5040.30 -5019.70 -4904.62
Operating profit 3223.40 3070.30 3276.60 3025.79
Interest -4.30 -4.80 -5.90 -5.13
Gross profit 3219.10 3065.50 3270.70 3020.66
Depreciation -292.60 -287.90 -445.40 -516.66
Profit Before Tax 2926.50 2777.60 2825.30 2504.00
Tax -630.10 -571.80 -536.20 -518.33
Net Profit 2296.40 2205.80 2289.10 1985.67
Equity capital 265.50 265.50 265.50 265.50
Face value 2.00 2.00 2.00 2.00
EPS 17.30 16.62 17.24 14.96

6. Ratio Analysis
Particulars FY14A FY15A FY16E FY17E
EPS (Rs.) 59.64 63.81 72.50 81.92
EBITDA Margin (%) 43.87% 39.07% 38.63% 38.75%
PBT Margin (%) 40.12% 34.60% 34.13% 34.26%
PAT Margin (%) 31.49% 27.47% 27.14% 27.14%
P/E Ratio (x) 30.49 28.50 25.08 22.20
ROE (%) 26.09% 23.78% 23.32% 23.13%
ROCE (%) 39.15% 37.37% 36.75% 36.58%
Debt Equity Ratio 0.01 0.01 0.01 0.01
EV/EBITDA (x) 21.42 19.40 16.98 14.90
Book Value (Rs.) 228.58 268.32 310.93 354.18
P/BV 7.96 6.78 5.85 5.13
Charts

7. OUTLOOK AND CONCLUSION
At the current market price of Rs.1818.60, the stock P/E ratio is at 25.08 x FY16E and 22.20 x FY17E
respectively.
Earning per share (EPS) of the company for the earnings for FY16E and FY17E is seen at Rs.72.50 and
Rs.81.92 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 15% over 2014 to 2017E
respectively.
On the basis of EV/EBITDA, the stock trades at 16.98 x for FY16E and 14.90 x for FY17E.
Price to Book Value of the stock is expected to be at 5.85 x and 5.13 x for FY16E and FY17E respectively.
We recommend ‘BUY’ in this particular scrip with a target price of Rs.2000.00 for Medium to Long term
investment.
INDUSTRY OVERVIEW
India is expected to be the third-largest global generic active pharmaceutical ingredient (API) merchant market
by 2016, with a 7.2 per cent market share. The country accounts for the second largest number of Abbreviated
New Drug Applications (ANDAs) and is the world’s leader in Drug Master Files (DMFs) applications with the US.
The country's pharmaceutical industry expanded at a compound annual growth rate (CAGR) of 9.4 per cent in
2013 to reach US$ 12 billion and is expected to expand at a CAGR of 23.9 per cent to US$ 55 billion by 2020. With
72 per cent of market share, generic drugs form the largest segment of the Indian pharmaceutical sector.
In terms of value, exports of pharmaceutical products from India increased at a CAGR of 26.1 per cent to US$ 10.1
billion during FY06–13. Generic drugs account for 20 per cent of global exports in terms of volume, making the
country the largest provider of generic medicines globally and expected to expand even further in coming years.
The Government of India plans to set up a US$ 640 million venture capital fund to boost drug discovery and
strengthen pharma infrastructure. Pharma Vision 2020 by the government’s Department of Pharmaceuticals
aims to make India a major hub for end-to-end drug discovery.
With 70 per cent of India’s population residing in rural areas, pharma companies have immense opportunities to
tap this market. Various companies are investing in the distribution network in rural areas. India also has the
potential to attract huge investments to its clinical trial market.

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This document is prepared by our research analysts and it does not constitute an offer or solicitation for the
purchase or sale of any financial instrument or as an official confirmation of any transaction. The information
contained herein is from publicly available data or other sources believed to be reliable but we do not represent that
it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be
in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for
the recipients’ investment decision based on this document.

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