Divi's Laboratories Exceeds Market Expectations with Strong Q2 Performance
Indian pharmaceutical major Divi's Laboratories delivered an impressive financial performance for the July-September quarter, surpassing market projections with substantial growth in both revenue and profitability. The Hyderabad-based contract drug manufacturer reported a 35% year-on-year increase in consolidated net profit, reaching ₹689 crore, significantly higher than analyst estimates.
Robust Financial Metrics Outperform Projections
The company's consolidated revenue from operations climbed to ₹2,860 crore, marking a 17% growth compared to the same period last year. This performance comfortably exceeded the Bloomberg poll projections that had estimated revenue at ₹2,599 crore and profit after tax at ₹608.9 crore. Analysts had anticipated revenue growth in the range of 9-10% year-on-year.
On a constant currency basis, the revenue growth stood at 10.8% for the quarter. The company also reported a foreign exchange gain of ₹63 crore during the period, contributing to the overall strong financial showing.
Export Dominance and Business Mix
Divi's Laboratories maintained its strong global presence with exports accounting for 90% of total revenues. The company's management revealed during the earnings call that the US, UK, and European markets collectively represented 74% of the total export revenue.
The business composition showed custom synthesis contributing 56% to the total product mix, while generic sales made up the remaining 44%. Despite facing pricing pressure in the generic business segment, the company maintained consistent volumes in its core portfolio that includes 30 commercially manufactured products.
Strategic Initiatives and Future Outlook
Chief Executive Kiran Divi highlighted the company's strategic advantages during the investor call. "Despite ongoing pricing pressure, our backward integration model continues to enable us to manage input cost effectively," she stated. The executive also emphasized the operational benefits from the unit-3 facility in Kakinada, which became operational earlier this year and supports the supply chain through in-house production of starting materials and intermediates.
The custom synthesis business is witnessing strong momentum with a steady flow of requests for proposals and site visits from global innovators. Divi's Laboratories is also expanding its peptide offerings with ambitions to become a global leader in complex peptide manufacturing. The company inaugurated its peptide centre of excellence this year and is engaged in multiple projects at various stages of clinical development.
Peptides represent a growing market segment, used as drug therapies to treat several diseases including diabetes, cancer, and hormonal disorders. The increasing demand for GLP-1 agonists, a class of drugs used to treat type 2 diabetes and obesity, is particularly driving growth in this segment.
The nutraceutical business emerged as another key growth driver, reporting sales of ₹242 crore during the quarter. The company is currently executing three capital expenditure programs with an estimated investment of ₹2,000 crore.
In a significant organizational development, Divi's announced the appointment of Nimmagadda Venkata Anirudh as President of Nutraceuticals on Friday. Despite the strong financial performance, the company's shares closed 4% lower at ₹6,648.00 on the National Stock Exchange, reflecting profit-taking after recent gains.
