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

22 May 2022 , 02:02 PM

Result date: 23^rd 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