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You are here : IndiaNotes >> Research & Analysis >> Companies >> Divi's Laboratories Ltd. >> Research

Divi's Laboratories: Enjoys good support between 1650 and 1700; buy

Adaaf Advisory Service | 27 Oct, 2014  | Follow Author | Add to my Favourites 
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Divis Laboratories posted good growth in Sales, but witnessed margins fall and further with higher depreciation, lower forex gain PAT declined during the quarter. The Company Standalone Sales grew by 24% YoY in Q1'FY15 to Rs 642.66 crore. However, The Operating Profit Margins were declined by 150 bps YoY to 36.6% and after this Operating Profit grew by 19% YoY to Rs 235.17 crore. The higher depreciation (59%) coupled with lower forex gain (down by sharp 97%) despite lower effective tax rate (down by 220 bps YoY to 21.6%) PAT declined by 4% QoQ to Rs 167.93 crore.


- Good growth in Sales, but Margins declined: The Sales grew by 24% YoY to Rs 642.66 crore for the quarter ended June 2014. However, Operating Profit Margins fell by 150 bps YoY to 36.6% on the back of fall in Raw material cost (down by 260 bps YoY) coupled with decline in other expenses (down by 10 bps YoY) despite the higher staff cost (up by 20 bps YoY) as percentage to Sales and net of stock adjustments. Eventually, Operating Profit growth comes down to 19% YoY to Rs 235.17 crore. Further, after the marginal 4% growth in other income to Rs 11.34 crore, EBIDTA grew by 18% YoY to Rs 246.51 crore.


- Lower forex gain in Q1, PAT declined by 4% YoY: With meager interest cost Rs 0.36 crore (down by 12% YoY) but after the sharp rise in depreciation (up by 59% YoY to Rs 33.26 crore), PBT before forex gain grew by 14% YoY to Rs 212.89 crore. Further, After adjusting for lower forex gain Rs 1.35 crore( down by sharp 97% from Rs 42.53 crore), PBT declined by 7% YoY to Rs 214.24 crore. Thanks to the lower effective tax rate (down by 220 bps YoY to 21.6%) PAT decline was lesser at 4% YoY to Rs 167.93 crore.


Standalone Yearly Performance:


The Sales grew by 18% YoY to Rs 2513.97 crore for the year ended March 2014. Notably, Operating Profit Margins expanded by 190 bps YoY to 40.5% and accordingly Operating Profit grew by 24% YoY to Rs 1018.86 crore. After the flat growth in other income at Rs 33.48 crore, EBIDTA grew by 23% YoY to Rs 1052.34 crore. With meager interest cost (Rs 2.06 crore vis-à-vis Rs 1.78 crore) but with higher depreciation (up by 20% YoY to Rs 92.06 crore), PBT before forex gain grew by 23% YoY to Rs 958.22 crore. Thanks to higher forex gain Rs 50.42 crore (up by 233% YoY from Rs 15.16 crore) and further with lower effective tax rate (down by 130 bps YoY 21.5%) PAT grew by 29% YoY to Rs 791.72 crore.


Technical:


This stock too along with many Pharma stocks is in a thick bull run and well poised for higher levels. On the lower side, the stock enjoys good support between 1650 and 1700 and on the higher side breaks out above 1750. The stock should witness 2000 plus levels. Investors can use declines to buy this stock from a medium to long term perspective.



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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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