This week has been a remarkable one for Divi’s Laboratories, a prominent player in the pharmaceutical sector, as its share price has drawn significant attention. Following a recent report from Citi Research, the stock received a ‘buy’ rating along with a target price of ₹6,400. The enthusiasm surrounding Divi’s Laboratories is reflected in its share price, which has experienced an impressive 12.02% increase over the past week and a staggering year-to-date (YTD) rise of over 55%. Today, Divi’s Laboratories shares surged nearly 3%, reaching a 52-week high at ₹6,106.50 on the Bombay Stock Exchange (BSE), showcasing its robust market performance.
Potential for Growth
According to Ruchit Jain, Lead Research Analyst at 5paisa, the immediate resistance level for Divi’s Laboratories share price stands at approximately ₹6,150, based on technical retracements. Should the stock breach this level, analysts believe it may continue its upward trajectory, potentially reaching ₹7,000 in the midterm. This optimistic outlook illustrates the increasing confidence in Divi’s Laboratories as the share price exhibits resilience and growth potential.
Leading the Pharma Market
Citi Research’s recent findings have positioned Divi’s Laboratories as a key player in the market for GLP-1 APIs (Glucagon-like peptide-1 active pharmaceutical ingredients). The report indicates that the company is on track to achieve potential revenues exceeding US$800 million by CY30E. This growth is attributed to the company’s alignment with current industry trends, including supply chain diversification. Innovators in the pharmaceutical sector have shown increased confidence in Divi’s Laboratories, evidenced by the inclusion of new products, such as Ribociclib and Upadacitinib, into the company’s portfolio.
Strategic Positioning
The increasing demand faced by Eli Lilly and other innovators reflects a broader trend within the industry to expand supply chains, particularly in light of the recent US Biosecure Act. Divi’s Laboratories stands out due to its capacity to scale operations efficiently at an industrial level, positioning it as a significant competitor in the CDMO (Contract Development and Manufacturing Organization) landscape. Although traditional European CDMOs remain relevant, there are concerns about their ability to keep up with rising demand due to high operational costs and challenges in scaling their capacities.
Market Catalysts
The US Biosecure Act is anticipated to act as a catalyst for innovators to diversify their supply chains, thereby enhancing the stature of Divi’s Laboratories within the chemistry-based CDMO sector. As more innovators demonstrate their trust in the company’s capabilities, Divi’s Laboratories is poised to solidify its position as a crucial participant in the market.
Strong Valuations Ahead
Divi’s Laboratories continues to demonstrate robust growth, with YTD increases nearing 40% as reported by Citi Research on October 8. The stock is currently trading approximately 20% higher than its historical premium over the NSE Pharma index. This strong performance reinforces the bullish sentiment among investors and analysts alike.
Forward-Looking Estimates
Citi Research assigns a 40x EV/EBITDA multiple to the company’s projected EBITDA for September 2026, deriving a target price of ₹6,400. This target multiple reflects a robust 30% premium over the company’s five-year historical mean. The brokerage believes that valuation metrics are not only likely to remain high but may continue to escalate as global innovators seek to diversify their supply bases, positioning Divi’s Laboratories as a key beneficiary of this trend.
Disclaimer: The views and recommendations mentioned in this article are based on the opinions of individual analysts and broking firms. Investors are encouraged to consult certified experts before making any investment decisions.
