DIVI'S LABS

Divi’s Labs posted very good Q3FY14 numbers. Beating all estimates, the company posted a net profit at Rs.219 crore, up 52% (YoY) on a 29% jump in net sales at Rs.689 crore. This jump in profit was despite a forex loss of Rs.5 crore compared to the forex gain it has last Q3 of Rs.16 crore. It is on efficient operational performance – better capacity utilization and product mix that these numbers have come forth. Its raw material costs came down significantly 6% (YoY) but this was more than compensated by the 27% surge in employee expenses. But overall costs were down; total expenses for the quarter were at 62% of the total income compared to 70% in previous Q3.

Three units of its DSN Special Economic Zone (SEZ) in Visakhapatnam are due for commercialization and US FDA inspection for the same could happen before end of FY14 in current Q4. It has a total of five units at this SEZ of which two have gone on stream and it is these units which are adding to the higher capacity and realizations. In FY15, once all 5 go online, the company could get onto a very good growth trajectory. The management expects topline to jump up 20% in FY15. Its main fray is the API business, which contributes more than 50% to the total revenues and it currently has some 20 products under development. For 9MFY14, the company’s net profit stands at Rs.599 crore v/s Rs.611 crore for FY13. Clearly, it will end FY14 on a much higher note, with net profit estimated at around Rs.750 crore.