**Divi’s Laboratories Anticipates Strong Revenue Growth and Margin Expansion**
Divi’s Laboratories Ltd, the second-largest pharmaceutical company in India by market capitalization, is projected to report a revenue increase of 14-18% for the quarter ending June 30. Analysts from BNP Paribas and Kotak Securities estimate that the contract development and manufacturing firm will achieve an 18% year-on-year revenue growth in the first quarter, while Nuvama predicts a growth rate of 14%. Additionally, profit after tax is expected to rise by 34% year-on-year, according to Nuvama’s analysis.
The company’s custom synthesis portfolio is anticipated to maintain its momentum, with a projected 23% year-on-year growth for the April-June quarter, as noted by Kotak. Meanwhile, the generic active pharmaceutical ingredients (API) segment is expected to grow by 13% year-on-year, although it may see a 4% decline compared to the previous quarter. Custom synthesis involves the production of specific chemical compounds, including novel APIs or intermediates, which are essential for effective medical treatments.
Brokerages are optimistic about significant margin expansion in Divi’s earnings before interest, taxes, depreciation, and amortization (EBITDA). Kotak Securities analysts forecast that Divi’s overall EBITDA for the first quarter of FY26 will grow by 33% year-on-year to ₹8.3 billion, despite a 6% decline from the previous quarter. They also predict an expansion of EBITDA margins by 370 basis points year-on-year to 33.1%, although this represents a 120 basis point decrease quarter-on-quarter. Nuvama estimates EBITDA margins to be around 34%.
After experiencing a decline over two consecutive years, Divi’s EBITDA margin rebounded in the fourth quarter of FY24-25. The margin had decreased from 35-38% during FY12-19 to 28.1% in FY24, before recovering to 31.7% in FY25. Despite various factors, including increased regulatory compliance costs, impacting Divi’s expenses over the past decade, its generics business remains competitive, according to Elara Securities. They project an EBITDA margin of 33.7% for FY26 and 35.4% for FY27.
Divi’s management has forecasted double-digit revenue growth for the current financial year. The company’s revenue growth slowed to 12.2% year-on-year in the fourth quarter (January-March) after four consecutive quarters of growth ranging from 18-25%. Over the past decade, revenue has grown at a compound annual growth rate of 8% in US dollar terms and 11.6% in rupee terms. In the fourth quarter, Divi’s net profit surged by 23% to ₹662 crore, while EBITDA increased by 21.2% year-on-year to ₹886 crore. For FY25, Divi’s revenue rose by 19% to ₹9,712 crore, with net profit climbing 37% to ₹2,191 crore.
In the March quarter, Divi’s custom synthesis business demonstrated strong momentum, characterized by high customer engagement and a notable increase in requests for proposals (RFPs) and regular site visits, as highlighted by the company’s management during an earnings call in May. In May, Divi’s also entered into a long-term manufacturing and supply agreement for advanced intermediates, which are crucial chemical building blocks used in drug development.
**FAQ**
**What is Divi’s Laboratories’ expected revenue growth for the upcoming quarter?**
Divi’s Laboratories is expected to report a revenue increase of 14-18% for the quarter ending June 30, with profit after tax projected to grow by 34% year-on-year.
