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Q4FY22 Preview: Divis Laboratories: Revenues seen at Rs23,432 million, PAT at Rs7,098 million

Weak performance likely on a sequential basis

May 22, 2022 2:02 IST | India Infoline News Service
Result date: 23rd May, 2022
Recommendation: Reduce
Target price: Rs3,720

Divis Laboratories (Divis) is likely to post muted performance in the March 2022 quarter on a sequential basis. This weakness will largely stem from a sharp 32% sequential decline in Molnupiravir revenue. The company’s exports of Molnupiravir API have declined from a monthly average of USD40-45 million in the December 2021 quarter to ~USD20 million in February 2022, implying a 50% decline in the monthly run-rate. While its Molnupiravir API export volumes have declined, its price has remained steady at USD1500/kg for the past 3 months. The company’s Molnupiravir API revenue could decline from ~USD105 million in December 2021 quarter to ~USD70 million in the March 2022 quarter. Consequently, Divis’ overall revenue will likely decline 6% sequentially (total revenue could increase ~31% over the year-ago quarter).

Divis has also seen pricing pressures on two of its largest generic API products, with average pricing for Naproxen (~40% of Divis' generic API revenue) and Dextromethorphan (~14% of Divis' generic API revenue) being down ~9% and ~15%, respectively, in FY22, which has also impacted growth of its base generic API business.

Weak revenue could lead to decline in EBITDA as well as Profit After Tax (PAT) on a sequential basis.

Important management insights to watch out for:
·         New launch pipeline
·         Likely full contribution from new launches
·         Margin drivers in the future
 
Rs Million March 2022 estimates YoY change QoQ change
Revenue 23,432 31% (6)%
EBITDA 10,076 41% (8)%
Profit After Tax 7,098 41% (21)%
Source: IIFL Research

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