Recommendation: Reduce
Target Price: Rs3,720
Divis Laboratories (Divis) is expected to post a moderate performance during the March 2022 quarter on a sequential basis. This weakness will largely come from a sharp 32% sequential decline in Molnupiravir revenue. The company’s molnupiravir API exports declined from a monthly average of $40-45 million in the December 2021 quarter to approximately $20 million in February 2022, implying a 50% decline in monthly execution rate. While its Molnupiravir API export volumes have declined, its price has remained stable at USD 1,500/kg for the past 3 months. The company’s Molnupiravir API revenue could decline from approximately $105 million in the December 2021 quarter to approximately $70 million in the March 2022 quarter. As a result, overall Divis revenue will likely decrease by 6% sequentially (total revenue could increase approximately 31% from the prior year quarter).
Divis also experienced price pressure on two of its largest generic API products, the average price of naproxen (~40% of Divis generic API revenue) and dextromethorphan (~14% of Divis Generic API) down ~9% and ~15%, respectively, in FY22, which also impacted the growth of its core Generic API business.
Low revenues could lead to lower EBITDA as well as profit after tax (PAT) on a sequential basis.
Important management information to monitor:
New launch pipeline
Likely total contribution of new launches
Margin drivers in the future
|
million rupees |
March 2022 estimates |
Annual change |
QoQ change |
| Revenue | 23,432 | 31% | (6)% |
| EBITDA | 10,076 | 41% | (8)% |
| Profit after tax | 7,098 | 41% | (21)% |
Source: IIFL Research
